Edited version of private advice

Authorisation Number: 1052247257778

Date of advice: 17 May 2024

Ruling

Subject: CGT - small business concessions - extension of time to make a choice

Question

Will the Commissioner exercise their discretion under paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of time to choose to apply any available small business concessions to a capital gain that arose in the 20XX income year?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

DD MM 20XX

Relevant facts and circumstances

You both held shares in the company (private company).

The shares in the company were transferred on XX month 20XX to related trusts, resulting in a capital gain.

When you lodged your 2021-22 income year tax return, the capital gain was not included due to an administrative error.

You would like to amend the tax return to correctly record the capital gain. You intend to apply the general 50% discount, the small business 50% active asset reduction and the small business retirement exemption.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 104-10(3)

Income Tax Assessment Act 1997 section 103-25

Reasons for decision

Under subsection 103-25(1) of the ITAA 1997, a choice must be made either by the day you lodged the relevant income tax return in which the CGT event occurred, or within a further time allowed by the Commissioner.

Subsection 104-10(3) of the ITAA 1997 provides that the time of a CGT event is when you enter into the contract for the disposal, or, if there is no contract, then the time is when the change of ownership occurs.

The general rule provided in ATO ID 2003/103 is that once a choice available under the CGT provisions has been made, it cannot be changed. A taxpayer who did not consider the CGT concessions, however, is treated as not having made a choice. If the Commissioner allows further time, they can make a choice for a CGT concession later and amend their return to reduce or disregard the capital gain.

You lodged your 20XX income tax return and did not declare the capital gain due to an administrative error. You plan to amend the tax return to reflect the capital gain and apply several of the small business CGT concessions. Given that you did not include the CGT event in your 20XX income year tax return, you did not consider the small business concessions at the time of lodgment. You have therefore not made a choice in relation to the concessions.

After taking into consideration your relevant circumstances, including the fact that no mischief is involved, there is no unsettling of other people or established practices, the Commissioner will allow an extension of time under paragraph 103-25(1)(b) of the ITAA 1997 to make a choice to apply any available CGT small business concessions to the gain.

The private ruling has been limited to the question requested upon application which is whether the Commissioner will exercise the discretion under paragraph 103-25(1)(b) of the ITAA 1997. The Commissioner has not considered your eligibility for the small business CGT concession.

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).