Private ruling: CGT event
Date of advice: 19 May 2026
Published: 27 July 2026
Ruling period: 30 June 20XX | 30 June 20XX | 30 June 20XX | 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise discretion under subsection 152-125(4) of the Income Tax Assessment Act 1997 (ITAA 1997) and extend the two-year time limit for the company under paragraph 152-125(1)(b) of the ITAA 1997? | A1: Yes.

Relevant facts and circumstances: The company is a small private company incorporated on XX XX 19YY. The company currently has X directors. Shareholding structure The company has three issued and fully paid ordinary shares. The shareholding structure is as follows: • XXXX holds X share; • XXXX holds X share; and • XXXX and XXXX jointly hold X share. Based on this structure, the effective dividend participation percentages are: • XXXX - X% • XXXX - X% • XXXX - X% Asset acquisition and use In XXXX, the company entered into a contract to acquire approximately X of land in XXXX (PID XXXXX). Legal title to the land was registered in the company's name on X X XXXX. The land was used by the company for X business for a number of years. Since XXXX, the land has been leased to third parties for agricultural use. Subdivision activities and change in purpose In X 20XX, the company formed the intention to subdivide the land into XX separate lots for sale. From early X 20XX, the company undertook activities directed toward obtaining approval for a subdivision, including engaging with council requirements and progressing a Development Application. As a result of this change in intention, the company determined that the land had commenced being held as trading stock. Accordingly: • The land was transferred from capital account to trading stock for accounting and taxation purposes; • The company elected under subsection 70-30(1A) of the ITAA 1997 to bring the land to account at market value; and • This election triggered CGT Event K4 under section 104-220 of the ITAA 1997 in the 20XX-XX income year. In the 20XX income tax return, the company applied the small business 15-year exemption to disregard the resulting capital gain. Subdivision timeline and delays The following events outline the progression of the subdivision project and associated delays: • X 20XX: The company engaged a survey firm to assess the feasibility of subdividing the land into XX lots. A Development Application (DA) was prepared and lodged with XXXX Council on X X 20XX. • Late 20XX: A statewide rezoning review conducted by the XXXX Planning Commission caused XXXX Council to place planning approvals on hold. Due to uncertainty surrounding the rezoning outcome, the company did not proceed with payment of DA fees at that time. • X 20XX: The company paid the DA fee of $X,XXX to maintain the application within the Council's assessment process. • X 20XX - X 20XX: Council requested the preparation of bushfire, grasslands and landscape impact reports. These reports were commissioned and provided by you. During this period, the land continued to be leased, and the company also considered selling the land as a single parcel. • X 20XX onwards: The company actively responded to further Council requests for reports and additional information. • XX X 20XX: The XXXX Planning Commission finalised the statewide rezoning review, resulting in the land being zoned Environmental Landscape. This introduced additional regulatory requirements. • XX X 20XX: After further delays within Council, a planning permit for the subdivision was granted, subject to XX conditions. • X 20XX - X 20XX: The company undertook work to satisfy permit conditions, including infrastructure planning and finalisation of subdivision plans. The final plan was approved by Council on XX X 20XX. • Significant delays were also experienced with external service providers, including a delay of approximately XX weeks in obtaining a response from the electricity provider, XXXX. • XX X 20XX: The first XXXX subdivided lots were listed for sale. Additional lots remain under development. Medical circumstances affecting progress In X 20XX, XXXX, one of the company's directors, was diagnosed with XXXXXX XX. XXXX has undergone ongoing treatment, including XX, requiring frequent medical appointments and recovery periods. XXXX, also a director, has acted as XXXX. These circumstances have reduced both directors' capacity to actively manage and progress the subdivision project. The X director, XXXX, is employed full-time outside the company, limiting their availability. As a result, there were practical constraints in coordinating decision-making and progressing required actions. Inability to make payments within the required timeframe Under paragraph 152-125(1)(b), the taxpayer is required to make payments of the exempt amount to CGT concession stakeholders within two years of the CGT event (XX 20XX). The company has been unable to make these payments because: • The subdivision process and sale of land have been substantially delayed due to factors outside the taxpayer's control, including regulatory processes, council delays, and third-party service constraints; • Cashflow required to make the payments is dependent on proceeds from the sale of subdivided lots; and • The first lots were not brought to market until XX XX 20XX. As at the date of this application, further subdivision work remains ongoing and additional lots are yet to be sold.

Relevant legislative provisions: Income Tax Assessment Act 1997 paragraph 152-125(1)(b) | Income Tax Assessment Act 1997 subsection 152-125(4)

Reasons for decision: Summary: Under section 152-125 of the ITAA 1997, where a company disregards a capital gain under the small business 15-year exemption, a payment of the exempt amount made to a CGT concession stakeholder is not included in the stakeholder's assessable income, provided the payment is made within two years after the CGT event under paragraph 152-125(1)(b) of the ITAA 1997. However, subsection 152-125(4) of the ITAA 1997 provides the Commissioner with a discretion to allow further time for the company to make the payment. In determining whether to exercise the discretion, the Commissioner considers whether: • there is an acceptable explanation for the delay and whether it is fair and equitable to allow additional time; • there is any prejudice to the Commissioner; • allowing further time would unsettle other taxpayers or established administrative practices; • allowing the extension would be fair to taxpayers in similar circumstances and consistent with the public interest; • there is any evidence of avoidance, mischief or manipulation; and • the consequences of granting or refusing the extension are appropriate in the circumstances. The discretion is exercised whether the taxpayer has taken reasonable steps to comply with their obligations but has been prevented from doing so by circumstances outside their control. | Detailed Reasoning - Application to your circumstance: The Commissioner accepts that the delay in making the payments was due to factors beyond the company's control. The subdivision experienced significant regulatory and administrative delays, including a statewide rezoning review, prolonged council approvals, additional permit conditions and delays from third party service providers. These factors slowed the development and the realisation of sale proceeds. The Commissioner also recognises the serious medical circumstances affecting one of the directors, which significantly impacted the directors' capacity to manage and progress the project. The company took active steps to comply with its obligations, including engaging professional advisers, progressing approvals, responding to council requirements and preparing the lots for sale. The delay did not arise from inaction, neglect or any attempt to defer compliance. The Commissioner accepts the company could not make the payment within the original two-year period as proceeds were not received in time and therefore will exercise the discretion under subsection 152-125(4) of the ITAA 1997 to extend the deadline in paragraph 152-125(1)(b) by X years, to 30 June 20XX.