Private ruling: Small business concessions - Rollover - Extension
Date of advice: 30 October 2015
Published: October 2015
Ruling period: Year ended 31 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 01 July 2012

Ruling: Q1: Will the Commissioner exercise its discretion under paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 to allow further time in which to choose to apply the small business capital gains tax (CGT) rollover to a business sale in the relevant income tax year? | A1: Yes. | Q2: Will the Commissioner allow the taxpayer 60 days from the date of issue of the private ruling in which to choose to apply the small business capital gains tax rollover? | A2: No, an amendment would have a nil effect on your tax return and is not necessary.

Relevant facts and circumstances: The taxpayer was a partner in partnership which carried on a business. In 20XX the partnership sold its business and terminated shortly afterwards. The taxpayer received sale proceeds from the business sale and was required to deal with the resulting capital gain in its relevant income tax return. The partnership and the taxpayer both had separate tax agents at all times and the tax agent for the partnership has never acted as tax agent for the taxpayer. The tax agent for the partnership advised the taxpayer of its share of the taxable capital gain from the sale of the partnership business. The taxpayer lodged their relevant tax return with this information. At a later date, the tax agent for the partnership became aware that an error had been made in the capital gains calculations and advised the taxpayer in 2015. Prior to this the taxpayer and their agent had no knowledge of the additional capital gain that was required to be declared. The taxpayer and the taxpayer's agent were both advised in 2015 of the correct gross capital gain on the sale of the business.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 103-25(1), | Income Tax Assessment Act 1997 subsection 103-25(2) and | Income Tax Assessment Act 1997 section 152-410.

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 under subsection 103-25(1) of the Income Tax Assessment Act 199 7 (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. The Commissioners view is stated in ATO ID 2003/103; the inclusion of a capital gain in a taxpayer's income tax return without any consideration of the small business CGT concessions does not constitute the making of a choice and does not prevent the taxpayer from later choosing the small business roll over in section 152-410 of the ITAA 1997. 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: Due to the advice of the partnerships previous tax agent, the relevant CGT concessions had not been considered and effectively a choice has not been made. 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.