ATO Interpretative Decision
ATO ID 2003/103
Capital Gains Tax
Capital gains tax: Choice and the small business roll-overFOI status: may be released
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This ATO ID has been amended as part of a review of when a choice can be made for the small business rollover.
Status of this decision: Decision Current
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Does the inclusion of a capital gain in a taxpayer's income tax return without any consideration of the small business capital gains tax (CGT) concessions in Division 152 of the Income Tax Assessment Act 1997 (ITAA 1997) constitute the making of a choice, and therefore prevent the taxpayer from later choosing the small business roll-over in section 152-410 of the ITAA 1997?
Decision
No. The inclusion of a capital gain in a taxpayer's income tax return without any consideration of the small business CGT concessions does not constitute the making of a choice, and therefore does not prevent the taxpayer from later choosing the small business roll-over in section 152-410 of the ITAA 1997.
Facts
The taxpayer made a capital gain after 21 September 1999 on the disposal of goodwill in the 1999-2000 income year.
Due to an oversight by the taxpayer's former tax agent, the small business CGT concessions in Division 152 of the ITAA 1997 were not considered and the whole of the capital gain was returned in the taxpayer's income tax return. The taxpayer's new tax agent detected this oversight and almost immediately notified the Commissioner. The taxpayer would now like to choose the small business roll-over in Subdivision 152-E of the ITAA 1997 to apply after the small business 50% reduction has applied to the capital gain. The taxpayer satisfies the basic conditions under Subdivision 152-A of the ITAA 1997 and the requirements for small business roll-over under section 152-410 of the ITAA 1997.
Reasons for Decision
The general rule is that a choice available under the 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).
A taxpayer who has considered the application of the CGT concessions and chosen a particular concession has made a choice which cannot later be changed. However, a taxpayer who did not consider the CGT concessions and accordingly included a capital gain in their income tax return has not made a choice and can, if the Commissioner allows further time, later make a choice for a CGT concession and amend their return to reduce or disregard the capital gain.
In this case, due to an oversight, the taxpayer did not consider any of the CGT concessions and hence did not make any choice.
As the taxpayer satisfies the conditions for small business roll-over in section 152-410 of the ITAA 1997, the taxpayer may later choose the small business roll-over in Subdivision 152-E of the ITAA 1997 for the capital gain if the Commissioner allows further time to make a choice under paragraph 103-25(1)(b) of the ITAA 1997.
Date of decision: 20 September 2002Year of income: Year ended 30 June 2000
Legislative References:
Income Tax Assessment Act 1997
Part 3-1
Part 3-3
section 103-25
paragraph 103-25(1)(b)
section 152-410
Keywords
Capital gains tax
Commissioner's discretion
Extension of time
Small business roll-over
CGT choice
ISSN: 1445-2782
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