1051573422906 | Legal database

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This edited version has been archived due to the length of time since original publication.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.

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Edited version of private advice

Authorisation Number: 1051573422906

Date of advice: 28 August 2019

Ruling

Subject: Capital gains tax - small business concession - extension of time

Question 1

Will the Commissioner extend the time under paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to permit you both to choose the small business rollover in Section 152-410 of the ITAA 1997 to a capital gain that arose in the year 20XX income year?

Answer

Yes.

Having considered your circumstances and the relevant factors the Commissioner considers it appropriate to grant an extension of the replacement asset period to 31 December 20XX. Further information can be found by searching 'QC 52291' on ato.gov.au

Question 2

Will the Commissioner extend the time under paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to permit you both to choose the small business retirement exemption in Section 152-305 of the ITAA 1997 to a capital gain that arose in the year 20XX income year?

Answer

Yes.

Yes. In this case you are under 55 and you satisfy the basic conditions. You are eligible to reduce your gain by applying the small business retirement exemption up to your life time limit of $500,000. As you are under 55 years old you must make a personal contribution equal to the exempt amount into a complying superannuation fund or retirement savings account by 31 December 20XX, you must also keep a record of the amount you choose to disregard. Further information can be found by searching 'QC 52290' on ato.gov.au

This ruling applies for the following periods:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts

Person A was born in 19xx.

Person B was born in 19xx.

Person A & person B are both under 55 years of age.

You both acquired in equal shares a property (The property)

You are also shareholders in 'C' with person A holding 99 shares and person B 1 share.

C carries on a business.

C leased the property for business purposes from when the property was purchased in 19XX until around 20XX.

C used the property to store business records and business plant and equipment that were used in the business.

Around 20XX a statutory authority informed you that it was compulsorily acquiring the property.

In 20XX the acquisition of the property was gazetted.

A lengthy dispute ensued in relation to compensation.

On 7 September 20XX the statutory authority paid the compensation.

The statutory authority took possession of the property around 20xx.

On 20xx you both acquired vacant property (property A) for the purposes of C using it for its business.

Property A was acquired with the intention that it be developed into a warehouse and open storage yard. You had not previously undertaken a commercial development and were unaware of the potential delays that you were to experience.

You were also unaware that you would be restricted from using property A until the occupation certificate was issued by the local council.

Property A remained unoccupied whilst you awaited the occupation certificate.

You engaged the services of an architect (first architect) in 20XX and paid a deposit.

On or around 20xx you obtained quotes on costs to construct the warehouse.

The first architect did not progress the plans for the warehouse. You requested updates between J 20xx and 20xx on the progress and reminded the first architect of the urgency of the development.

You were not satisfied with the first architect and engaged the services of another architect around 20xx to progress the development.

You experienced further delays with the local council and the certifier of the development.

The construction of the warehouse was commenced in 20xx.

The warehouse is currently completed and the yard is nearing completion.

During the period of delay in construction of property A, you decided that your self-managed superannuation fund would borrow money and acquire a unit for C to operate its business from. The unit was acquired around 20XX.

You use the services the of a tax agent to complete your income tax returns. However you were unaware of the possible implication of the compulsory acquisition of the property.

On or around 20XX you sought the services of a specialist tax lawyer. Who has recently reviewed your income tax returns and you are now aware that you are eligible to access the small business concessions and would like to amend your income tax.

The aggregated turnover of C is more than $XXX.

The net asset value of the C, its affiliates and connected entities is less than $XXX.

You have made a gain from the compulsory acquisition.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 103-25(1)

Income Tax Assessment Act 1997 paragraph 103-25(1)(b)

Income Tax Assessment Act 1997 subsection 103-25(2)

Income Tax Assessment Act 1997 paragraph 103-25(3)(b)

Income Tax Assessment Act 1997 section 152-35

Income Tax Assessment Act 1997 section 152-205

Income Tax Assessment Act 1997 section 152-305

Income Tax Assessment Act 1997 section 152-410

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