Edited version of private advice

Authorisation Number: 1051934469989

Date of advice: 16 December 2021

Ruling

Subject: Extension of time for a managed investment trust to make an election

Question

Will the Commissioner exercise the discretion in subparagraph 275-115(3)(a)(ii) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow a later day for the Trustee of the Trusts to make a choice for capital gains to be the primary basis for calculating gains or losses of the trust from the disposal of trust assets?

Answer

Yes until 31 January 20XX

This private ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

This private ruling applies to the beneficiaries of the trust and to the trustee and to any future trustee, for as long as the private ruling remains current.

Company A Pty Ltd is the Trustee for the following trusts:

•         Investment Trust A

•         Investment Trust B

•         Investment Trust C

•         Investment Trust D

•         Investment Trust E

•         Investment Trust F.

These trusts are managed investment trusts (MITs) formed during the year ended 30 June 20XX.

The 20XX income tax returns for the above MITs were lodged during the period XX February 20XX to XX February 20XX

Company A Pty Ltd is also the Trustee for the following trusts:

•         Investment Trust G

•         Investment Trust H

These trusts are MITs formed during the year ended 30 June 20XX.

The 20XX income tax returns for these MITs were lodged on XX February 20XX.

Section 275-115(3)(a)(i) ITAA 1997 states that a choice of capital account of revenue account can only be made on or before the day it is required to lodge its income tax return for the income year in which it became a MIT.

In the 20XX and 20XX income tax returns lodged for the MITs, the previous tax agent of the Trustee did not answer the question 'If the trust is a managed investment trust, has the trustee made an election for capital account treatment'

Section 275-115(3)(a)(ii) states that the Commissioner can allow a later day for the choice to be made.

The MITs are not trading trusts.

The Trustee contends:

The previous tax agent who completed the income tax returns for the MITs had no prior experience in preparing MIT tax returns.

The previous tax agent did not bring it to the notice of the trustees the specific requirements for MITs and the timeline for the CGT election to be made.

The Trustee has always treated their respective investments as being on capital account.

The Trustee on becoming aware of the administrative oversight, immediately took steps to manage ongoing compliance obligations going forward.

The MITs have not made any gains from the disposal of 'covered assets' as defined in section 275-105 of the Income tax Assessment Act 1997 during the years ended 30 June 20XX, 20XX or 20XX.

The granting of the extension of time for making the election will not impact distribution statements or ATO lodgment obligations of the MIT.

The granting of the extension will not confer an additional advantage for the taxpayers seeking the Commissioner's discretion as it will place the respective trusts in the same position as other MITs if the election had been made in the relevant income tax returns.

Relevant legislative provisions

Division 275 of the Income Tax Assessment Act 1997