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Can a taxpayer who chose the small business roll-over in Subdivision 152-E of the Income Tax Assessment Act 1997 (ITAA 1997) and acquired a replacement asset, for a capital gain made after 21 September 1999, later change their choice and choose the small business retirement exemption in Subdivision 152-D of the ITAA 1997?

No. A choice made for the small business roll-over in Subdivision 152-E of the ITAA 1997 cannot later be changed.

The taxpayer made a capital gain on the sale of an active asset after 21 September 1999.

Subsequently, the taxpayer acquired a replacement asset and chose the small business roll-over in Subdivision 152-E of the ITAA 1997 to disregard the capital gain as indicated in the relevant income tax return.

After the income tax assessment had issued, the taxpayer sought the exercise of the Commissioner's discretion to choose the small business retirement exemption under Subdivision 152-D of the ITAA 1997 instead of the small business roll-over.

A choice between inconsistent courses of action, once made, is binding and cannot be withdrawn or recanted - unless this is specifically provided for. See Scarf v. Jardine (1882) 7 AppCas 345; Motor Oil Hellas (Corinth) Refineries SA v. Shipping Corporation of India (The "Kanchenjunga") [1990] 1 Lloyd's rep 391, 397 (Lord Goff of Chieveley); The Commonwealth v. Verwayen (1990) 170 CLR 394; (1990) 64 ALJR 540; (1990) 95 ALR 321.

Accordingly, a choice made for the small business roll-over in Subdivision 152-E of the ITAA 1997 is irrevocable and cannot later be changed. The taxpayer is not able to later choose the small business retirement exemption in Subdivision 152-D of the ITAA 1997 after having previously chosen the small business roll-over. This reflects the general rule that applies to the making of choices throughout the Income Tax Assessment Act 1936 and the ITAA 1997.

Paragraph 103-25(1)(b) of the ITAA 1997 allows the Commissioner to grant an extension of time in which to make a choice. However, paragraph 103-25(1)(b) has no application once a taxpayer has made a choice.

There is nothing contained in the ITAA 1997 that would permit the Commissioner to allow the taxpayer to change the choice originally made.