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Edited version of private advice
Authorisation Number: 1052204401678
Date of advice: 14 December 2023
Ruling
Subject: CGT - small business concessions
Question
Will the Commissioner exercise their discretion under paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of time for you to choose to apply the retirement exemption under Division 152-D of ITAA 1997?
Answer
Yes. The general rule is that a choice available under the CGT provisions once made cannot be changed. Such a choice must usually be made by the time the income tax return is lodged or within such further time as the Commissioner allows. However, in your case, it is clear that the concessions were not considered, and no choice was made regarding the small business concessions when the return was initially lodged. Therefore, the Commissioner will allow an extension of time under paragraph 103-25(1)(b) of the ITAA 1997 to make a choice to apply the retirement exemption to the gain arising from the sale of the interest in the Property.
The private ruling has been limited to the question requested upon application which is whether the Commissioner can exercise their discretion under paragraph 103-25(1)(b) of the ITAA 1997. Thus, the Commissioner has not considered whether you are in fact entitled to the small business CGT concessions.
This ruling applies for the following period:
Year ended 30 June 2022
The scheme commenced on:
1 July 2021
Relevant facts and circumstances
The Trust owned a 50% interest in the Property.
The Trust sold its interest in the Property.
The settlement was delayed and instead occurred in the following financial year.
The Trust erroneously believed that the capital gain should be reported in the year that the property interest was settled. As such, it did not notify the tax agent of the sale of the interest in the Property at the time the income tax return was prepared for the contract year. Accordingly, the income tax return was lodged without disclosing the capital gain.
On preparation of the income tax return for the following financial year, the Trust notified the tax agent of the capital gain. The tax agent correctly identified that the capital gain should have been reported in the previous income tax return.
The sale of the interest in the Property is eligible for the small business CGT concessions.
The tax return will be amended to report the CGT event and capital gain. The trust wishes to apply the small business 50% reduction and the small business retirement exemption.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 103-25
Income Tax Assessment Act 1997 Subdivision 152-C
Income Tax Assessment Act 1997 Subdivision 152-D