Private ruling: Small business concessions
Date of advice: 21 February 2017
Published: August 2017
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Will the Commissioner exercise his discretion under paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you an extension of time to make a choice to apply the small business retirement exemption? | A1: Yes.

Relevant facts and circumstances: You incurred a capital gain that you intended to elect to disregard under the retirement exemption. Due to an administrative error, and through no fault of yours, your accountant lodged your Income Tax Return early. Because of the error a superannuation contribution was not made.

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

Reasons for decision: Summary: You may choose to disregard all or part of a capital gain under the small business retirement exemption if you satisfy certain conditions. 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). 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: An inadvertent administrative error made by your accountant's office meant that your return was lodged prior to when you intended. Subsequently, you did not have the opportunity to make your choice in writing and make a superannuation contribution prior to the lodgement of your return. In accordance with paragraph 103-25(3)(b) of the ITAA 1997, as your choice had not been made in writing, it is considered that you have not yet made your choice. We consider that you have provided 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.