Private ruling: CGT Retirement Exemption
Published: April 2013
Ruling period: Year ending 30 June 2012
Date scheme commenced: 1 July 2011

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 2011-12 financial year? Answer Yes.

Relevant facts and circumstances: During the 2011-12 financial year, you incurred a capital gain. It was always your intention that you would utilise the retirement exemption in relation to this capital gain. You reviewed your draft tax return for the 2011-12 financial year prepared by your accountant. At this point you indicated your intention to exercise your choice to utilise the retirement exemption by documenting your choice in writing and making a contribution to your superannuation prior to the lodgement of your return. Your return was due for lodgement during the next calendar month. Due to a clerical error in your accountant's office, your tax return for the 2011-12 financial year was lodged early. You had not yet provided your authority for the return to be lodged. Upon realising what had occurred, your accountant's office contacted the ATO to request the reversal of your lodgement. However, your accountant was advised that this would not be possible. You have not proceeded with your contribution to superannuation as you do not want to breach any provisions of the Superannuation Industry Supervision Act 1993 . You have requested an extension of time to choose to apply the retirement exemption to allow you time to make the choice in writing and make a superannuation contribution.

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

Reasons for decision: Summary: You may choose to disregard all or part of a capital gain under the small business retirement exemption if you satisfy certain conditions. The general rule is that a choice available under the capital gains tax (CGT) provisions once made can not 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: A clerical error made by your accountant's office meant that your 2011-12 financial year return was lodged without your consent. Subsequently, you did not have the opportunity to make your choice in writing and make a superannuation contribution prior to the lodgement of your return as you had intended. In accordance with paragraph 103-25(3) (b) of the ITAA 1997, as your choice had not been made in writing, it is considered that you have not yet made your choice. We consider that you have provided 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 15 May 2013 is allowed for you to make the choice to apply the retirement exemption.