Private ruling: Commissioner's decision
Date of advice: 5 May 2026
Published: 13 July 2026
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise his discretion to grant an extension of time under section 70-100(7) for election to be made under 70-100(4)? | A1: Yes.

Relevant facts and circumstances: The Partnership was formed pursuant to an agreement in 20XX. The Partnership is comprised of the individual members of the XYZ Family as well as associated partnerships, corporate trustees, and discretionary trusts to the XYZ Family, including the S Trust. Up until 20XX, the Partnership carried on a primary production business on land owned by other discretionary trusts in the broader XYZ Family group. As part of an agreement between family members in 20XX, it was agreed that: • the S Trust would exit the Partnership and commence conducting its own primary production business; • in exiting the Partnership, certain items of trading stock would be transferred to the S Trust for the business it commenced to conduct; and • the remaining partners of the Partnership would continue to conduct the business operations. In accordance with the above agreement, in 20XX: • certain trading stock of the Partnership was disposed of to the S Trust; and • the remaining trading stock of the Partnership was transferred to the remaining partners of the Partnership. In accordance with the above disposals of trading stock in 20XX, two trading stock elections were executed dated in early 20XX for roll-over relief under section 70-100(4) to each of the above disposals. The reasons for the delay in execution of the elections was due to an oversight by the accountant and tax agent for the partners. As soon as the accountant and tax agent for the partners realised that the elections needed to be made, the accountant and tax agent promptly advised the partners and took all steps to have the elections produced for signing.

Relevant legislative provisions: Income Tax Assessment Act 1997 70-75 | Income Tax Assessment Act 1997 70-80 | Income Tax Assessment Act 1997 70-100 | Income Tax Assessment Act 1997 70-100(1) | Income Tax Assessment Act 1997 70-100(2) | Income Tax Assessment Act 1997 70-100(3) | Income Tax Assessment Act 1997 70-100(4) | Income Tax Assessment Act 1997 70-100(5) | Income Tax Assessment Act 1997 70-100(6) | Income Tax Assessment Act 1997 70-100(7) | Income Tax Assessment Act 1997 70-100(8)

Reasons for decision: Summary: Division 70 of the ITAA 1997 deals with trading stock. Generally, when trading stock is disposed of outside the ordinary course of business special rules apply (subdivision 70-75). | Detailed Reasoning - Income tax treatment when you dispose of trading stock: Pursuant to section 70-80, the income tax treatment of trading stock when disposed of in the ordinary course of business is as follows: (1) When you dispose of an item of your trading stock in the ordinary course of business, what you get for it is included in your assessable income (under section 6-5) as ordinary income. ... (2) If an item stops being your trading stock for certain other reasons, an amount is generally included in your assessable income to balance the reduction in trading stock on hand, which is a transaction on revenue account. | Detailed Reasoning - Notional disposal when you stop holding an item as trading stock: Subsection 70-80(3) sets out other reasons for an item to stop being trading stock, which includes disposing of the stock outside the ordinary course of business. In certain circumstances a notional disposal of trading stock occurs, and the trading stock is treated as having been disposed of outside the ordinary course of business. This situation is dealt with under section 70-100. Subsection 70-100(1) states: (1) An item of trading stock is treated as having been disposed of outside the ordinary course of business if it stops being trading stock on hand of an entity (the transferor) and, immediately afterwards: (a) the transferor is not the item's sole owner; but (b) an entity that owned the item (alone or with others) immediately beforehand still has an interest in the item. The Explanatory Memorandum to the Tax Law Improvement Bill 1997 explains what happens when there is a change in interests in a partnership: What if there is a change in interests? If the interests in an item of stock change (eg. a partnership takes in a new partner), then the law may treat it as being a disposal outside the ordinary course of business [section 70-100]. This happens when there is not a complete change in interests but the item ceases to be trading stock of the original entity. This disposal outside the ordinary course of business would normally be treated as occurring at market value. However, if the item is an asset of the new owner's business, and all the owners agree, they can elect to roll it over for the value at which the original entity would have taken it into account at the end of the year. A 25% continuity of interests is required for this election to be available. Applying subsection 70-100(1), for tax purposes, when the S Trust left the Partnership in 20XX, there was a deemed disposal of: • the relevant trading stock from the Partnership to the S Trust; and • the remaining trading stock of the Partnership to the remaining partners of Partnership. | Detailed Reasoning - Tax value and election: Generally: • Pursuant to subsection 70-100(2) if you dispose of an item of your trading stock outside the ordinary course of a business that you are carrying on of which the item is an asset, your assessable income includes the market value of the item on the day of the disposal; and • Pursuant to subsection 70-100(3), the entity or entities (the transferee) that own the item immediately after it stops being trading stock on hand of the transferor are treated as having bought the item for the same value on that day. However, subsections 70-100(4) and (5) provide an exception to this rule. They state as follows: Election to treat item as disposed of at closing value (4) However, an election can be made to treat the item as having been disposed of for what would have been its value as trading stock of the transferor on hand at the end of an income year ending on that day. (5) If this election is made, this value is included in the transferor's assessable income for the income year that includes that day. The transferee is treated as having bought the item for the same value on that day. | Detailed Reasoning - Commissioner's discretion under subsection 70-100(7): Subsection 70-100(7) states: Also, the election can only be made before 1 September following the end of the financial year in which the item stops being trading stock on hand of the transferor. However, the Commissioner can allow the election to be made later. Therefore, pursuant to subsection 70-100(7) the elections for the disposals by the Partnership which occurred on 1 July 20XX should have been made prior to 1 September 2024, being 1 September following the end of the financial year in which the trading stock was disposed of. However, the Commissioner under subsection 70-100(7) can allow an election to be made later. The Commissioner considers that the reason and circumstances given by the taxpayer are sufficient to allow the elections to be made past the date specified under subsection 70-100(7). Specifically, the Commissioner considers that it is appropriate to grant the extension given the delay in executing the election was not intentional by the taxpayer; rather it was an oversight by the taxpayer's accountant and tax agent. It is also relevant that immediate remedial steps were taken upon discovery of the oversight. These factors are considered to be sufficiently persuasive as to warrant the exercise of the discretion in this case.