Edited version of private advice

Authorisation Number: 1052405067174

Date of advice: 10 June 2025

Ruling

Subject: CGT - small business concessions

Question 1

Does the inclusion of an election to apply the small business rollover provisions in your 20XX tax return constitute the making of a choice under subsection 103-25(2) of the Income Tax Assessment Act 1997 (ITAA 1997) that cannot be later changed?

Answer 1

Yes

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You sold your business, which resulted in a capital gain. You provided us with details on when the business was sold and the amount of the capital gain.

Person A instructed your accountant to make use of any available concession to reduce the capital gain in your tax return to nil.

Your accountant applied the Small Business Rollover when preparing your tax return to reduce your capital gain to nil. The 50% active asset reduction was not considered by your accountant.

Your accountant did not explain the other available small business concessions to Person A.

Person A has stated that he did not make an informed and educated choice to not apply the 50% active asset reduction.

You provided us with details on when your tax return was lodged and when your new accountant was appointed.

Relevant legislative provisions

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

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

Reasons for decision

Under subsection 103-25(1) of the ITAA 1997 a choice you can make under either Part 3-1 or part 3-3 of the ITAA 1997 must be made:

(a)           by the day you lodge your income tax return for the income year in which the relevant CGT event happened, or

(b)           within a further time allowed by the Commissioner;

Subsection 103-25(2) of the ITAA 1997 states that:

The way you (and any other entity making the choice) prepare your income tax returns is sufficient evidence of the making of the choice.

ATO ID 2003/103 Capital gains tax: Choice and the small business roll-over (ATO ID 2003/103), considers when a choice is made in relation to the small business CGT concessions. It provides the general rule that a choice available under CGT provisions once made, cannot be changed. However, it also provides that a taxpayer, who has chosen to apply a particular concession while preparing their tax return is considered to have made a choice which cannot later be changed.

Application to your circumstances

When your accountant lodged your 20XX tax return, they included your CGT event and applied the small business roll-over exemption. It is considered that a choice was made when your tax return was lodged. Under subsection 103-25(2) of the ITAA 1997 this is sufficient evidence that you have made a choice. Therefore, you are prevented from amending your 20XX tax return to change your choice.

Whilst we sympathise with your situation there is nothing contained in the ITAA 1997 that would permit the Commissioner to allow you to change the choice originally made.

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).