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Edited version of private advice
Authorisation Number: 1051643282765
Date of advice: 13 March 2020
Ruling
Subject: Small business capital gains tax concessions
Question
Will the Commissioner exercise his discretion to allow an extension of time under section 103-25(1)(b) of the Income Tax Assessment Act of 1997 (ITAA 1997) to allow further time for the taxpayers to choose to apply the small business retirement exemption under Subdivision 152-D of the ITAA 1997?
Answer
Yes, the Commissioner will allow an extension of time.
You did not make a valid choice at the time you lodged your year ending 30 June 20xx income tax return. Having considered your situation, it is reasonable to grant an extension of time to make a choice to utilise the small business retirement exemption.
This ruling applies for the following period:
Year ended 30 June 20xx
The scheme commences on:
1 July 20xx
Relevant facts and circumstances
You and your spouse were CGT concession stakeholders for Company A and Company B. Both companies were Australian residents for tax purposes in year ending 30 June 20xx.
You transferred the shares in the companies to Company C pursuant to transfer of share documents.
Your previous accountants lodged your tax returns. They prepared the returns on the basis that Division 615 rollover was applied to the disposal of the transferred shares.
You later sought the services of new accountants.
Upon review of your tax returns, your new accountants discovered the following:
· no shares in Investments have been issued in your names in exchange for the transferred shares;
· there was no written agreement transferring the shares;
· Companies A B and C did not form a consolidated tax group; and
· no choice has been made to apply the Division 615 rollover.
Subsequently, your solicitors advised that you did not meet the conditions to apply Division 615 Rollover to the disposal of the transferred shares.
They also advised that you may reduce the capital gain to nil by applying the following discounts:
· 50% general CGT discount
· 50% active asset reduction
· retirement exemption
You would not exceed your CGT retirement exemption limit by contributing the remaining gain to your superannuation funds.
Your total net assets value just before the sale of shares was less than $XXX.
The transferred shares were active assets.
Companies A and B both satisfy the net asset test.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 103-25
Income Tax Assessment Act 1997 Division 115
Income Tax Assessment Act 1997 Division 152
Income Tax Assessment Act 1997 Subdivision 152-A
Income Tax Assessment Act 1997 Section 152-205
Income Tax Assessment Act 1997 Section 152-305