Private ruling: CGT - small business concessions- retirement exemption
Date of advice: 10 March 2016
Published: May 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Will the Commissioner allow further time as provided in paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) for you to choose to apply the small business retirement exemption to a capital gain that arose in the relevant income year? | A1: Yes.

Relevant facts and circumstances: You disposed of an active asset and realised a capital gain. You used the general CGT discount to reduce the gain by 50% as you held the asset for more than 12 months. You have lodged your tax returns for the year of the CGT event. However, due to an oversight, the capital gain was not considered and the original return contains no mention of any CGT concessions. You are asking the Commissioner to exercise the discretion under 103-25(1)(b) of the ITAA 1997 to allow you the additional time to make the necessary choice to use the small business retirement exemption for the gain realised in the year ended 30 June 20XX. You offer the following information in support for your eligibility to use the small business retirement exemption: • You satisfy the basic conditions of the small business concessions. • You are a CGT concession stakeholder in the company. • As you will be under 55 years of age just before the choice is made, the CGT exempt amount will be contributed to a complying superannuation fund. • No contributions have yet been paid to the complying superannuation fund. • The contributions will be made by the time you make the choice.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 103-25(1) and | Income Tax Assessment Act 1997 Subsection 152-315(4).

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 (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. In your case, an oversight by your previous tax agent meant that the small business concessions were not considered in relation to the capital gain resulting from the sale of the shares in the relevant income year. As a result of this oversight, you effectively have not made a choice. 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. An extension of time until X is allowed for you to make the choice to apply the retirement exemption.