Private ruling: CGT - SBC - extension of time to make a choice
Published: August 2014
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Will the Commissioner allow further time under paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) for you to choose to apply a small business rollover concession under Division 152 of the ITAA 1997 to a capital gain that arose in the year ended 30 June 2012? | A1: Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You disposed of an active asset in July 20XX. It had been used the entire ownership period in your primary production business for livestock grazing. Just prior to the sale of the land, you purchased a new block of land. The land is used your primary production business for livestock grazing. The property is much larger than the previous block as the intention was to expand your primary production operations. You have also built a residence on the property. You believed you qualified for a capital gains tax exemption, so you did not mention the capital gain to your accountant when they were preparing your return. Accordingly, the original returns contain no mention of the capital gain, nor any mention of any CGT concessions. In 2014 the return was amended by the tax office to include the capital gain you did not report. The gain was reduced by the general 50% discount. You are asking the Commissioner to exercise the discretion under 103-25(1)(b) of the ITAA 1997 to allow you the additional time to make the necessary choice to use the small business rollover for the gain realised in the year ended 30 June 2012. You contend that you satisfy the conditions to apply the small business rollover.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 103-25(1) and | Income Tax Assessment Act 1997 Division 152.

Reasons for decision: Summary: The general rule is that a choice available under the capital gains tax (CGT) provisions, once made, cannot be changed. Generally, such a choice must be made by the time the income tax return is lodged, or within such further time as the Commissioner allows (subsection 103-25(1) of the ITAA 1997). A taxpayer who has considered the application of the CGT concessions and chosen a particular concession has made a choice which cannot later be changed. However, a taxpayer who did not consider the CGT concessions and accordingly included a capital gain in their income tax return has not made a choice and can, if the Commissioner allows further time, later make a choice for a CGT concession to apply and amend their return to reduce or disregard the capital gain. In determining if the Commissioner should use his discretion to allow an extension of time the following will be considered: • there should be evidence of an acceptable explanation for the period of extension requested and that it would be fair and equitable in the circumstances to provide such an extension; • account must be had to any prejudice to the Commissioner which may result from the additional time being allowed, however the mere absence of prejudice is not enough to justify the granting of an extension; • account must be had of any unsettling of people, other than the Commissioner, or of established practices; • there must be a consideration of fairness to people in like positions and the wider public interest; • whether there is any mischief involved; and • a consideration of the consequences. In accordance with ATO ID 2003/103 Capital Gains Tax: Choice and the small business roll-over , in this case, due to an oversight, the taxpayer did not consider any of the CGT concessions and hence did not make any choice. In your case, it is considered that an extension of time would not cause prejudice to the Commissioner, nor unsettle others or cause any unfairness to others in like positions. The small business concessions were not considered at the time of lodging your taxation return, as the capital gain was not reported. Accordingly, an extension of time is allowed for you to make the choice to apply a small business concession under Division 152 of the ITAA 1997.