Edited version of private advice

Authorisation Number: 1051936566241

Date of advice: 23 December 2021

Ruling

Subject: Commissioner's discretion to extend

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 Trust 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

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

This private ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are different from these facts, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

Company A Pty Ltd is the Trustee for a Managed Investment Trust (MIT)

This MIT was formed during the year ended 30 June 20XX.

The 20XX income tax returns for the MIT was lodged on 2 March 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 income tax returns lodged for the MIT, 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 MIT is not a trading trust.

The Trustee contends:

The previous tax agent who completed the income tax returns for the MIT 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 the investments of the MIT 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, 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