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Edited version of your written advice
Authorisation Number: 1051272119162
Date of advice: 22 August 2017
Ruling
Subject: Small business concession retirement exemption
Question
Does the Commissioner have a discretion to allow you further time to notify the superannuation fund of the contribution under subdivision 152-D of the Income Tax Assessment Act 1997 (ITAA1997)?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
In mid 20XX you disposed of XX shares in Company A in exchange for shares in Company B.
This created a capital gain.
After the application of the 50% CGT discount and the 50% active asset reduction you are left with a capital gain of $XX.
X is the CGT concession stakeholder.
They are under 55 years of age.
You made contributions to a Superannuation fund on their behalf.
These contributions were made over a period of time. The multiple transactions are due to the daily limits of internet bank transfers.
The contributions in the 20XX/YY financial year made to the Superannuation fund totalled $XX.
X is familiar with the normal process adopted by superannuation funds in relation to personal contribution and to communicate with the superfund soon after the end of each financial year to advise the amounts of concessional and non-concessional contributions during the prior year.
X had unfamiliarity with the conditions of the retirement exemption and had an expectation that a similar process might be followed for notifying the superannuation fund of the contributions by you in regards to the CGT event.
You did not notify the superannuation fund that the contributions were being made and were intended to be made in relation to the CGT small business retirement exemption at the time the payments were made.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subdivision 152-D
Income Tax Assessment Act 1997 Paragraph 103-25(1)(b)
Income Tax Assessment Act 1997 Subsection 103-25(1)
Reasons for decision
Retirement exemption
Subdivision 152-D of the ITAA 1997 deals with the small business retirement exemption. To qualify for the small business retirement exemption you must satisfy the basic conditions and then the specific conditions that apply.
A company must make a payment to at least one of its CGT concession stakeholders if the company receives an amount of capital proceeds from a CGT event for which it makes a choice under Subdivision 152-D of the ITAA 1997.
The payment must be made by the later of:
● 7 days after the company makes the choice, and
● 7 days after the company receives an amount of proceeds from the CGT event.
The amount of payment required to be made under Subdivision 152-D of the ITAA 1997 must not exceed the relevant CGT exempt amount.
If a CGT concession stakeholder is under 55 just before a payment is made:
● the company must make the payment to the CGT concession stakeholder by contributing it for the stakeholder to a complying superannuation fund or an RSA in respect of the stakeholder; and
● the company must notify the trustee of the fund or the RSA provider at the time the contribution is made that the contribution is made in accordance with this section.
Choices
Subsection 103-25(1) of the ITAA 1997 provides that a choice in regard to the CGT small business concessions must be made:
● by the day you lodge your income tax return for the income year in which the relevant CGT event happened, or
● within further time allowed by the Commissioner.
Paragraph 103-25(3)(b) of the ITAA 1997 requires a choice to apply the small business retirement exemption in writing.
ATO ID 2003/102 states that the general rule is once a choice is made it cannot 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.
Section 103-25 only allows the Commissioner to use his discretion to extend the time to make a choice to use the small business retirement exemption. It does not allow the Commissioner to extend the time to notify the superannuation fund of the contributions made on behalf of a CGT concession stakeholder.
Application to your circumstances
Due to an unfamiliarity with the conditions of the CGT retirement exemption, specifically the requirement to notify the superannuation fund of the contributions at the time of the payment, you did not notify the superannuation fund on the contributions within the required time as allowed by subdivision 152-D of the ITAA 1997.
While we appreciate your circumstances the Commissioner has no discretion to extend the time to notify the superannuation fund of the contributions as per subdivision 152-D of the ITAA 1997.
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