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1 Will the Commissioner allow further time as provided in paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to choose to apply the small business CGT concessions to the capital gains that arose upon the disposal of the Property?

1 Yes. Question 2 Are you entitled to apply the small business 15-year exemption in section 152-105 of the ITAA 1997 to disregard the capital gain made on the disposal of your first interest in the Property (Interest 1)? Answer 2 Yes. Question 3 Are you entitled to apply the small business retirement exemption in section 152-305 of the ITAA 1997 to disregard the capital gain made on the disposal of your second interest in the Property (Interest 2)? Answer 3 Yes. This ruling applies for the following period: Year ended 30 June 20XX The scheme commenced on: November 20XX

You are an Australian Resident and over 55 years of age. You and your spouse, who passed away less than X years ago, owned a Company. You both served as joint directors and shareholders. Your child is now the director. You now hold all shares. You oversaw the Company's affairs, daily business and activities. You do not derive any pensions from the Australian Government and live off the savings and income from assets in publicly listed companies. You purchased the Property over X years ago with your spouse as joint tenants. Your spouse's interest in the Property was transferred to you less than X years ago. The Property was industrial land. The industrial land was used by the Company as a warehouse from the time of acquisition and was intended to be a business asset. The Company paid rent to its directors for using the land. Your child had desires to downsize the Company. As a result, you felt it necessary to implement succession planning and retire from active involvement in the Company.

You disposed of the Property and made a capital gain on the disposal. You sold the Property as part of your retirement plan. The sales proceeds from the industrial land and other business assets are your source of finances to support your retirement. Before the sale, you worked X hours a week. You had an active involvement in your family business. You primarily handled accounts receivable. You played an active role in managing cash flow. You were involved in the financial performance, including business settings and strategic direction. After the sale, you reduced your working hours and you retired permanently. You now enjoy your time with family and friends. You maintain active by involving yourself in arts and keeping up with world affairs. You have no intention of returning to work. Based on the advice of your former tax agent, you applied the 50% CGT discount at the time of filing your tax return for the relevant year. You did not apply the small business CGT concessions to your capital gains. You have now changed accountants and are aware of the small business CGT concessions.

The net value of your CGT assets, the CGT assets of any entities connected with you and the CGT assets of any affiliates or entities connected with affiliates of you does not exceed $X. You have not used the small business retirement exemption previously.

Income Tax Assessment Act 1997 paragraph 103-25(1)(b) Income Tax Assessment Act 1997 Subdivision 152-A Income Tax Assessment Act 1997 section 152-10 Income Tax Assessment Act 1997 section 152-35 Income Tax Assessment Act 1997 section 152-40 Income Tax Assessment Act 1997 section 152-47 Income Tax Assessment Act 1997 Subdivision 152-B Income Tax Assessment Act 1997 section 152-105 Income Tax Assessment Act 1997 Subdivision 152-D Income Tax Assessment Act 1997 section 152-305

Question 1 Summary The Commissioner will exercise their discretion under paragraph 103-25(1)(b) of the ITAA 1997 to extend the time limit so the small business CGT concessions can be applied to the proceeds from the CGT events. Detailed reasoning You may choose to disregard all or part of a capital gain under the small business CGT concessions if you satisfy certain conditions. The general rule is that a choice available under the CGT provisions, once made, cannot be changed. Under subsection 103-25(1) of the ITAA 1997, generally, such a choice must be made by the time the income tax return is lodged or within such further time as the Commissioner allows. In determining if the Commissioner should use their discretion to allow an extension of time, the following will be considered: •                     there should be evidence of an acceptable explanation for the period of extension requested and that it would be fair and equitable in the circumstances to provide such an extension,

•                     account must be had to any prejudice to the Commissioner which may result from the additional time being allowed, however the mere absence of prejudice is not enough to justify the granting of an extension, •                     account must be had of any unsettling of people, other than the Commissioner or of established practices, •                     there must be a consideration of fairness to people in like positions and the wider public interest, •                     whether there is any mischief involved, and •                     a consideration of the consequences. An oversight by your previous accountant meant the small business CGT concessions were not applied to the capital gains which were included in your income tax return. We consider this to be an acceptable explanation for the period of extension required. There would be no prejudice to the Commissioner or unsettling of people by allowing the extension. There is no mischief involved. The Commissioner considers it fair and equitable in these circumstances to exercise their discretion. An extension of time is allowed for you to make the choice to apply the small business CGT concessions.

Question 2 Summary You satisfy the basic conditions in Subdivision 152-A of the ITAA 1997 and the additional conditions for the small business 15-year exemption in Subdivision 152-B of the ITAA 1997 in relation to Interest 1. You can disregard the capital gain made on its disposal. Detailed reasoning Section 152-105 of the ITAA 1997 provides a small business 15-year exemption for individuals. Under this section, you can disregard the capital gain made on the disposal of a CGT asset if you: •                     satisfy the basic conditions for the small business CGT concessions in Subdivision 152-A of the ITAA 1997 for the gain, •                     continuously owned the CGT asset for the 15-year period ending just before the CGT event, and •                     are at least 55 years old at the time of the CGT event and the event happens in connection with your retirement or are permanently incapacitated at that time.

Whether a CGT event happens in connection with an individual's retirement depends on the circumstances of each case. We consider there would need to be at least a significant reduction in the number of hours the individual works or a significant change in their present activities to be regarded as a retirement. However, it is not necessary for there to be a permanent and everlasting retirement from the workforce. A CGT event may happen in connection with your retirement irrespective of whether it happens before or after your retirement. However, your retirement must have some proximity to the CGT event. That is, you must retire at or near the time of the CGT event. When you sold the Property, you reduced your working hours. You ceased active involvement in the Company and began to spend more time on leisure activities. This reduction in hours and change in your activities is regarded as retirement. In your case, the basic conditions in Subdivision 152-A of the ITAA 1997 are satisfied because: •                     a CGT event happened when you disposed of Interest 1, •                     the event resulted in a gain,

•                     the net value of your CGT assets, the CGT assets of any entities connected with you and the CGT assets of any affiliates or entities connected with affiliates of you does not exceed $X, and •                     you owned Interest X for more than X years and the Property was used in a business carried on by an affiliate or a connected entity for a total of at least X years of your ownership period. In addition, •                     you continuously owned Interest X for the X-year period ending just before the CGT event, and •                     you were at least X years old when you disposed of the Property and the disposal happened in connection with your retirement. Therefore, you qualify for the small business X-year exemption in section 152-105 of the ITAA 1997 in relation to Interest X. You can disregard the capital gain made on its disposal. Question 3 Summary You may choose to apply the small business retirement exemption to the capital gain after any capital losses have been applied. Detailed reasoning

You have not continuously owned Interest X for the X-year period ending just before the CGT event. Therefore, you do not qualify for the small business X-year exemption in section 152-105 of the ITAA 1997 in relation to Interest X. Despite this, you qualify for the small business retirement exemption in section 152-305 of the ITAA 1997. Subsection 152-305(1) of the ITAA 1997 provides if you are an individual 55 years of age or over, you can choose to disregard all or part of a capital gain if the basic conditions in Subdivision 152-A are satisfied for the gain. The choice must be made: •                     either: °                     by the day you lodge your income tax return for the income year in which the relevant CGT event happened, or °                     within a further time allowed by the Commissioner (section 103-25 of the ITAA 1997), and •                     in a way that ensures your CGT retirement limit of $X is not exceeded (paragraph 152-315(2)(a) of the ITAA 1997). The amount chosen for the asset is the CGT exempt amount (subsection 152-315(3) of the ITAA 1997). The CGT exempt amount must be specified in writing (subsection 152-315(4) of the ITAA 1997).

As outlined above, you satisfy the basic conditions in Subdivision 152-A of the ITAA 1997 for the capital gain made on the disposal of Interest X. Provided you make the choice to apply the small business retirement exemption to disregard all or part of the capital gain within the further time allowed by the Commissioner and keep a written record of the amount you choose to disregard, you may choose to apply the small business retirement exemption to the capital gain.