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Edited version of your written advice
Authorisation Number: 1012940026319
Date of advice: 21 January 2016
Ruling
Subject: Small business retirement exemption
Question
Will the Commissioner grant you an extension of time to make a choice to apply the small business retirement exemption to the capital gain that arose in the 20VV-WW financial year?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 20WW
The scheme commences on
1 July 20XX
Relevant facts and circumstances
You operated a business from land and buildings ('the property').
Due to the poor health of your principal director, you sold the property in the 20VV-WW financial year. The principal director had been solely responsible for your operations and management. This responsibility passed to their spouse (also a director) upon the principal director becoming ill.
A capital gain was made on the sale of the property.
You intended to access the small business retirement exemption but failed to make a written choice in the appropriate form to do this.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 103-25
Income Tax Assessment Act 1997 Section 152-315
Reasons for decision
Summary
The Commissioner has granted you an extension of time to choose to apply the retirement exemption to the capital gain.
Detailed reasoning
You may choose to disregard all or part of a capital gain under the small business retirement exemption contained in subdivision 152-D of the Income Tax Assessment Act 1997 (ITAA 1997) if you satisfy certain conditions.
The general rule is that a choice available under the capital gains tax 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 factors are considered:
• your explanation for not making the choice by the time it should have been made
• whether it would be fair and equitable in the circumstances to allow you more time to make a choice
• if prejudice to the Commissioner of Taxation might result from additional time being allowed to you, however, the absence of prejudice by itself is not enough to justify granting an extension
• whether it would be fair and equitable to people in similar positions and the wider public interest, and
• if any mischief is involved.
After consideration of the above factors and your circumstances, the Commissioner has exercised his discretion and granted you an extension to make the choice to apply the retirement exemption.
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