Private ruling: CGT - SBC - EOT to make a choice
Published: December 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Will the Commissioner allow further time as provided in paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) for you to choose to apply or to not apply the small business concessions to a capital gain that arose in the 2011-12 financial year? | A1: Yes.

Relevant facts and circumstances: Trust one sold their business in the 20XX financial year and made a capital gain. The gain was distributed from Trust one to Trust two. Trust two then distributed the gain to X. All three entities have lodged their 20XX tax return and have declared the CGT event. Trust one misinterpreted the CGT small business concessions legislation and did not consider the concessions. Due to the complexity of the various entities involved, further time is needed to assess whether you meet the basic conditions for the small business concessions.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 103-25(1)

Reasons for decision: Summary: You may choose to disregard or defer all or part of a capital gain under the small business CGT concessions if you satisfy certain conditions. The general rule is that a choice available under the CGT provisions once made can not 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). Under subsection 103-25(2) of the ITAA 1997, the way you prepare your income tax return is sufficient evidence of the making of the choice. However, a taxpayer who did not consider the CGT concessions has not made a choice and can, if the Commissioner allows further time under subsection 103-25(1) of the ITAA 1997, later make a choice to apply a CGT concession and amend their return to reduce or disregard the relevant 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. Having considered the relevant facts, the Commissioner is able to apply his discretion under paragraph 103-25(1)(b) of the ITAA 1997 and allow a reasonable extension to the time limit. Allowing an extension is not prejudicial to the Commissioner in this case nor is it unfair to other people in similar positions. An extension of time until Month 20XX is allowed for you to make the choice to apply the small business concessions.