• Choices

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    There are number of provisions in the capital gains tax (CGT) laws that allow you to make a choice.

    Some of the provisions allow you to defer, or roll over, a capital gain you make when a CGT event (such as exchanging an asset for a replacement asset) happens until a later CGT event (such as selling the replacement asset).

    When and how you make a choice

    The general rule under CGT is that you must make a choice by the day you lodge your income tax return for the year in which the relevant CGT event happened.

    The way you prepare your tax return is sufficient evidence of the making of your choice. However, there are some exceptions:

    • companies must make some decisions about replacement asset rollovers earlier
    • choices relating to the small business retirement exemption must be made in writing, and
    • a longer period is allowed to choose the small business rollover.

    Once you make a choice, it cannot be changed. Your choice is binding.

    However, there are some circumstances when the Tax Office considers that you have not made a choice. These are if you lodge your tax return without being aware that:

    • events have happened that required you to make a choice, or
    • a choice was available.

    In these circumstances, the Tax Office may allow you further time to make a choice.

    Factors to be considered for an extension of time

    To determine if further time should be allowed, the Tax Office considers factors such as whether:

    • you have an acceptable explanation for not making the choice by the time it should have been made
    • it would be fair and equitable in the circumstances to allow you further time to make a choice
    • prejudice to the Commissioner of Taxation may result from additional time being allowed to you (note that the absence of prejudice by itself is not enough to justify the granting of an extension)
    • it would be fair and equitable to people in similar positions and the wider public interest, and
    • any mischief is involved.

    Each case is decided on its own merits.

    How to request an extension of time to make a choice

    If you have lodged a tax return without knowing a choice was available to you under capital gains tax law and you want further time to make the choice, see Choices you make under capital gains tax on our website to find out how to make such a request.

    Examples of choices available under capital gains tax

    Examples of CGT choices you make include the choice:

    • to use the indexation method rather than the CGT discount method if a CGT event happens to a CGT asset you acquired before 21 September 1999 (or are taken to have acquired before that date for the purpose of using those methods) - see Choosing the indexation or discount method
    • to make a capital loss for the income year in which a liquidator or administrator declares in writing that shares or securities held in a company are worthless - see Shares in a company in liquidation or administration
    • to rollover a capital gain if a company you hold shares in is taken over and you receive shares in the takeover company and the takeover meets certain conditions (this is known as scrip-for-scrip rollover). It can also apply if a trust or fund you hold units in is taken over and you receive units in the takeover trust or fund. The company, trust or fund will usually advise investors if the conditions for rollover are met - see Scrip-for-scrip rollover
    • to roll over a capital gain if you hold shares in a company that demerges (or splits), you receive shares in the demerged company and the demerger meets certain conditions. Rollover can also apply if you hold units in a trust or fund that demerges and you receive units in the demerged trust or fund. The head company or head trust or fund will usually advise investors if the conditions for rollover are met - see Demergers
    • to rollover a capital gain if you receive money or property (or both) as compensation for the loss or destruction of an asset or for the compulsory acquisition of property by an Australian government agency and certain conditions are met - see chapter 7
    • to treat a dwelling as your main residence even though:
    •  
    • for the main residence exemption, you make the choice when you prepare your income tax return for the income year in which you enter into the contract to sell the dwelling. If you own both:
      • the dwelling that you can choose to treat as your main residence for one of the periods above, and
      • the dwelling you actually lived in during that period
       

    you make the choice for the year you enter into the contract to sell the first of those dwellings.

    Last modified: 06 Oct 2009QC 18504