Private ruling: Capital gains tax
Published: February 2014
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Will the Commissioner exercise his discretion under paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you an extension of time to make a choice to apply the small business retirement exemption? | A1: Yes.

Relevant facts and circumstances: You jointly owned a business. You subsequently sold the business. You are over 65 and have subsequently retired. Settlement did not proceed until the following financial year. The relevant tax returns were prepared before settlement date. You were unaware that the contract date was important for capital gains purposes so the tax returns were prepared and lodged without reference to the capital gain.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 103-25.

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. However, a taxpayer who did not consider the CGT concessions has not made a choice and can, if the Commissioner allows further time under subsection 103-25(1) of the ITAA 1997, later make a choice to apply a CGT concession and amend their return to reduce or disregard the relevant capital gain. 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. Having regards to your full circumstances and the above principles, the Commissioner considers that it would be appropriate to exercise the discretion in this case. 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 is allowed for you to make the choice to apply the retirement exemption.