Private ruling: CGT - small business concessions, extension of time
Published: May 2013
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013
Date scheme commenced: 1 July 2010

Ruling: Q1: Will the Commissioner allow further time under paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) for you to choose to apply a small business concession under Division 152 of the ITAA 1997 to a capital gain that arose in the 2011-12 financial year? | A1: Yes

Relevant facts and circumstances: You owned a property which consisted of: A portion of land acquired pre-September 1985 A portion of land acquired post-September 1985. The relevant authority compulsorily acquired the property in year ended 30 June 2011. You disputed the amount of compensation for the compulsory acquisition. You received an amount of compensation in year ended 30 June 2011, and a further amount in year ended 30 June 2013. Your previous accountant did not consider your eligibility for the small business concessions in relation to the compulsory acquisition of the post-CGT land. Prior to the compulsory acquisition: The net value of the assets of you, your affiliates and your connected entities was less than $6 million The post-CGT land satisfied the active asset test. XX is your sole shareholder and at least 55 years of age.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 103-25(1) | Income Tax Assessment Act 1997 Division 152

Reasons for decision: Detailed Reasoning - Detailed reasoning: 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). 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 to apply and amend their return to reduce or disregard the capital gain. In determining if the Commissioner should use his discretion to allow an extension of time the following will be considered: (a) 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; (b) 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; (c) account must be had of any unsettling of people, other than the Commissioner, or of established practices; (d) there must be a consideration of fairness to people in like positions and the wider public interest; (e) whether there is any mischief involved; and (f) a consideration of the consequences. In accordance with ATO ID 2003/103 Capital Gains Tax: Choice and the small business roll-over , in this case, due to an oversight, the taxpayer did not consider any of the CGT concessions and hence did not make any choice. Delay is partly attributable to the dispute involving quantum of compensation from the resuming authority. It is considered that an extension of time would not cause prejudice to the Commissioner, nor unsettle others or cause any unfairness to others in like positions. You have advised that there is no mischief involved. Accordingly, an extension of time until 30 June 2013 is allowed for you to make the choice to apply a small business concession under Division 152 of the ITAA 1997.