Private ruling: CGT - small business concessions - making a choice
Published: May 2015
Ruling period: Year ending 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner allow further time as provided in paragraph 103-25(1)(b) of the ITAA 1997 for you to choose to apply the small business retirement exemption to a capital gain that arose in the relevant financial year? | A1: Yes | Q2: Will the Commissioner allow further time as provided in paragraph 103-25(1)(b) of the ITAA 1997 for you to choose to apply the small business rollover to a capital gain that arose in the relevant financial year? | A2: Yes

Relevant facts and circumstances: You owned a property. You disposed of the property under a contract during the relevant financial year. You are eligible for the small business concessions in relation to the gain made on the disposal of the property. You were under the impression that the capital gains tax (CGT) event occurred in the subsequent financial year. Accordingly, when preparing your relevant tax returns you did not consider the CGT small business concessions in relation to the gain made on the disposal of the property. You became aware of the error when you presented the information in relation to the disposal of the property to your accountants as they were preparing your subsequent tax return.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 103-25(1)

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. | Detailed Reasoning - Application to your circumstances: Due to an oversight in the preparation of your relevant tax return, you did not consider the relevant CGT concessions and 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 dd/mm/yyyy is allowed for you to make the choice to apply the relevant small business concessions.