Edited version of your private ruling

Authorisation Number: 1012537579927

Ruling

Subject: CGT - SBC - EOT to make a choice

Question 1

Will the Commissioner allow further time as provided in paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) for you to choose to apply or to not apply the small business active asset reduction to a capital gain that arose in the relevant financial year?

Answer

Yes, an extension will be granted to dd/mm/yyyy

This ruling applies for the following period

Year ending 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts and circumstances

Trust one sold their business in the relevant financial year and made a capital gain.

The gain was distributed from Trust one to Trust two.

Trust two then distributed the gain to an individual.

All three entities have lodged their relevant tax return and have declared the CGT event.

Trust one misinterpreted the CGT small business concessions legislation and did not consider the concessions.

Trust one satisfies the conditions for the small business CGT concessions.

Just before the CGT event occurred the net value of your assets, including the assets of your affiliated and connected entities, was less than $6 million.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 103-25(1).

Reasons for decision

You may choose to disregard or defer all or part of a capital gain under the small business CGT concessions if you satisfy certain conditions.

The general rule is that a choice available under the CGT provisions once made can not be changed. Generally, such a choice must be made by the time the income tax return is lodged, or within such further time as the Commissioner allows (subsection 103-25(1) of the ITAA 1997).

Under subsection 103-25(2) of the ITAA 1997, the way you prepare your income tax return is sufficient evidence of the making of the choice. Paragraph 103-25(3)(b) of the ITAA 1997, however, contains an exception in relation to the small business retirement exemption, as subsection 152-315(4) of the ITAA 1997 requires the choice for this exemption to be made in writing.

In determining if the Commissioner should use his discretion to allow an extension of time the following will be considered:

· there should be evidence of an acceptable explanation for the period of extension requested and that it would be fair and equitable in the circumstances to provide such an extension;

· account must be had to any prejudice to the Commissioner which may result from the additional time being allowed, however the mere absence of prejudice is not enough to justify the granting of an extension;

· account must be had of any unsettling of people, other than the Commissioner, or of established practices;

· there must be a consideration of fairness to people in like positions and the wider public interest;

· whether there is any mischief involved; and

· a consideration of the consequences.

Application to your circumstances

An oversight and misunderstanding of the legislation meant that you did not consider the relevant CGT concessions and effectively have not made a choice.

We consider this to be an acceptable explanation for the period of extension required. There would be no prejudice to the Commissioner or unsettling of people by allowing the extension. There is no mischief involved. The Commissioner considers it fair and equitable in these circumstances to exercise his discretion.

An extension of time until dd/mm/yyyy is allowed for you to make the choice to apply the retirement exemption.