Private ruling: Small business concessions
Date of advice: 28 July 2016
Published: September 2016
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Will the Commissioner grant an extension of time under paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to choose the retirement exemption concession? | A1: No.

Relevant facts and circumstances: You sold a business. You lodged your tax return on the basis of electing to use the CGT small business rollover provisions in relation to the disposal of an active asset. You have changed your mind and you now would like to apply the retirement exemption.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 103-25 | Income Tax Assessment Act 1997 subsection 104-185(1) | Income Tax Assessment Act 1997 section 152-35

Reasons for decision: Summary: A choice to obtain the small business retirement exemption 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 subsections 152-315(4) and (5) of the ITAA 1997 require the choice for this exemption to be made in writing. The general rule is that a choice available under the capital gains tax (CGT) provisions, once made, cannot be changed. 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 and amend their return to reduce or disregard the capital gain. You have requested the Commissioner to allow further time for you to make the choice and apply the retirement exemption. You applied the rollover concession to reduce the assessable gain in your income tax return. As you made the choice to apply this concession, this choice cannot be changed. Further, section 152-305 of the ITAA 1997 provides that if you are aged under, 55 the choice to apply the retirement exemption is conditional upon you contributing the amount to a complying superannuation fund. This contribution is required to be made at the time you make the choice, or at the time you receive the proceeds. From the information provided, these conditions have not been met.