Private ruling: CGT - retirement exemption
Date of advice: 16 November 2023
Published: 8 January 2024
Ruling period: Year ended 30 June 2019 | Year ended 30 June 2020 | Year ended 30 June 2021 | Year ended 30 June 2022 | Year ended 30 June 2023 | Year ending 30 June 2024
Date scheme commenced: 1 July 2018

Ruling: Q1: Will the Commissioner exercise their discretion under paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of time for you to make a choice to apply any available small business capital gains tax (CGT) concessions to a capital gain that arose on the sale of the second and third tranche of shares? | A1: You lodged your tax return and did not include the CGT events relating to the second and third tranche of shares. This approach is in line with TD 94/89 as, despite the CGT events occurring in that year, settlement was yet to occur at the time of your lodgement. You are now required to lodge an amendment to your income tax return to include the CGT event. Given that you did not include the CGT events in your income tax return, it is clear that you did not consider the small business concessions at the time of lodgement. It follows that we do not consider that you have made a choice in relation to the concessions. After taking into consideration your relevant circumstances, including the fact that no mischief is involved and there is no unsettling of other people or established practices, the Commissioner will allow an extension of time to make a choice to apply any available small business CGT concessions.

Relevant facts and circumstances: You owned shares in a Proprietary Limited company. You entered into an agreement to sell to a purchaser the shares on 3 completion dates over 3 different financial years. Sales consideration was payable on each completion date. Each tranche of shares is not transferred to the purchaser until each completion date. The sale contract states that the agreement is effectively three separate agreements for the sale and purchase of shares with three completion dates. You wish to apply the retirement exemption to the sale of the shares. The CGT concessional stakeholder is under the age of 55. When completing your income tax return you applied the 50% general CGT discount, the 50% active asset discount and the small business retirement exemption to the first tranche of shares following the first completion date. The contribution for the first tranche of shares was made to a complying superannuation fund.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 103-25 | Income Tax Assessment Act 1997 section 104-10(3) | Income Tax Assessment Act 1997 section 152-305