Private ruling: CGT - small business concessions
Date of advice: 15 September 2015
Published: September 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Will the Commissioner allow further time as provided in paragraph 103-25(1)(b) of the ITAA 1997 for you to choose to apply the small business retirement exemption to a capital gain that arose in the 2013-14 financial year? | A1: Yes | Q2: Will the Commissioner allow further time as provided in paragraph 103-25(1)(b) of the ITAA 1997 for you to choose to apply the small business rollover to a capital gain that arose in the 2013-14 financial year? | A2: 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 sold an asset during the relevant financial year and made a capital gain. You sought advice in relation to the capital gains tax (CGT) consequences from the sale. Based on the advice you received it was determined that the small business retirement exemption could be applied to part of the gain and the small business rollover could be applied to the remainder. You instructed your tax agent to prepare your relevant return on this basis. The tax agent made several errors in preparing the return, including failing to apply the small business concessions. Upon discovering the error, you made a written election to apply the retirement exemption and the small business rollover. A contribution has been made to a complying superannuation fund in respect of the significant individual who is under 55 years of age.

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 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). 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. Paragraph 103-25(3)(b) of the ITAA 1997, however, contains an exception in relation to the small business retirement exemption, as subsection 152-315(4) of the ITAA 1997 requires the choice for this exemption to be made in writing. 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. | Detailed Reasoning - Application to your circumstances: Although you had discussed the option of applying the CGT small business concessions with your advisor, the relevant tax return was not prepared on the agreed basis. We consider that you effectively had not made a choice. We consider this to be an acceptable explanation for the period of extension required. There would be no prejudice to the Commissioner or unsettling of people by allowing the extension. There is no mischief involved. The Commissioner considers it fair and equitable in these circumstances to exercise his discretion. An extension of time is allowed for you to make the choice to apply the retirement exemption and small business rollover.