| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012811066930
Ruling
Subject: CGT - small business concessions - extension of time to make choice
Question 1
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 2012-13 financial year?
Answer
Yes, an extension will be granted to 30 June 2015.
Question 2
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 15 year exemption to a capital gain that arose in the 2012-13 financial year?
Answer
Yes, an extension will be granted to 30 June 2015.
This ruling applies for the following periods:
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
The scheme commences on:
1 July 2012
Relevant facts and circumstances
The deceased died in July 20XX.
In June 20XX, the deceased met with their solicitor to sign transfer documents to transfer three parcels of land to their relatives utilising the intergenerational transfer stamp duty exemptions.
In April/May 20XX, the deceased engaged a new accountant to assist with their estate planning matters.
The deceased's 20XX-XX tax returns were lodged by his existing tax agent, omitting the capital gain from the CGT events resulting from the transfer of the properties in June 20XX.
After the lodgement of the 20XX-XX tax return, the Executor for the deceased appointed the new accountant to prepare final tax returns and any further work necessary on behalf of the deceased.
Upon review the 20XX-XX return, it was discovered that the capital gain resulting from the CGT events in June 20XX was omitted from the return.
A written election by the deceased to utilise the small business CGT concessions for the 20XX-XX financial year has not been located.
During the estate planning process, the new accountant determined that the deceased was eligible for the small business CGT concessions. It was the deceased's intention to utilise the retirement exemption concession for two of the properties and the 15 year exemption for the third property.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 103-25(1)
Income Tax Assessment Act 1997 subsection 103-25(2)
Income Tax Assessment Act 1997 paragraph 103-25(3)(b)
Income Tax Assessment Act 1997 subsection 152-315(4)
Reasons for decision
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.
Application to your circumstances
The deceased had commenced the estate planning process with a new accountant prior to his death and it was the deceased's intention to utilise the retirement exemption concession for two of the properties and the 15 year exemption for the third property. An oversight or misunderstanding by the deceased's existing tax agent resulted in the capital gain from the transfer of the 3 properties not being included in the deceased's 20XX-XX tax return. As the deceased died prior to the 20XX-XX tax return being lodged, there has been no consideration of the relevant CGT concessions and effectively a choice has not been made.
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.
A specific date for the extension period to be granted has not been requested. We consider an extension of time to make the choice to apply the retirement exemption and the 15 year exemption to 30 June 2015 to be sufficient.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
