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Edited version of your written advice
Authorisation Number: 1051195363517
Date of Advice: 27 February 2017
Ruling
Subject: capital gains tax - small business concessions - extension of time
Question:
Will the Commissioner grant an extension of time as provided in paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) for you to utilise the small business capital gains tax (CGT) rollover concession contained within subdivision 152-E of the ITAA 1997?
Answer
Yes.
This ruling applies for the following periods:
Year ending 30 June 2017
Year ending 30 June 2016
The scheme commenced on:
1 July 2015
Relevant facts
You owned shares in a private company 'A'.
You disposed of the shares in 'A' in 2015.
The disposal of the shares in 'A' resulted in a capital gain.
You reduced the capital gain by utilising the small business active asset reduction and the general 50 per cent discount.
You included a net capital gain in your 2014-15 income tax return.
You used the services of tax agent to manage your tax affairs from the 2014-15 year.
You became aware of the possibility of accessing the replacement asset rollover concessions in 2016.
You informed your tax agent of your intention to claim a rollover exemption as you are considering acquiring a similar business.
You would like to amend your 2014-15 return to give effect to the rollover provisions.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Section 103-25
Income Tax Assessment Act 1997 Subsection 152-315(4)
Reasons for decision
Summary
The Commissioner will exercise his discretion under subsection 103-25(1) in your favour by allowing you to amend your 2014-15 tax return to make a valid choice.
Exercising a Valid Choice
The general rule is that a choice available under the capital gains tax (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.
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 to apply and amend their return to reduce or disregard the capital gain.
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
In your case, your 2014-15 return was lodged showing a capital gain. Usually this would represent the making of a choice. However you were not aware of the rollover provisions at the time the return was prepared, and when you became aware of the CGT rollover choice available, you elected to make the rollover and informed your tax agent. We consider that the lodging of your original 2014-15 return did not represent you making a genuine choice under section 103-25, and so we will allow you additional time to amend your return and make a valid roll-over election.
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