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Ruling
Subject: capital gains tax
Question
Will the Commissioner extend the 2 year time limit under paragraph 152-125(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
Year ended 30 June 2018
Year ended 30 June 2019
The scheme commences on:
1 July 2012
Relevant facts and circumstances
You and your spouse have 100% ownership of a small business.
You and your spouse are in the process of retiring and are in negotiations to sell the business to existing employees.
The potential new owners are unable to pay the full capital proceeds within 2 years of the contract taking place.
The terms of the sale indicate a greater than 2 year instalment period.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 152-125(1)(b) and
Income Tax Assessment Act 1997 section 152-125(4).
Reasons for decision
Summary
The Commissioner will allow an extension of time for a payment to be made to the CGT concession stakeholders.
Detailed reasoning
According to the Advance guide to capital gains tax concessions for small business 2010-11, the small business 15 year exemption provides a total exemption of a capital gain if you have continuously owned the CGT asset for 15 years and the relevant individual meets certain tests.
One of these conditions requires the company or trust make a payment within two years after the CGT event that resulted in the capital gain. However, in appropriate circumstances, the Commissioner may extend this two year period. The abovementioned guide also provides the relevant considerations applied by the Commissioner to extend the two year period.
Having regard to your full circumstances and the above principles, the Commissioner will allow an extension of time.
Additional information
This ruling has not considered your eligibility for the small business 15 year exemption. You should ensure that you satisfy the basic conditions and the other conditions relevant for the exemption. More information is available in the publication Advanced guide to capital gains tax concessions for small business 2010-11 (NAT 3359), which is available on our website www.ato.gov.au