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 make a choice to apply any available small business capital gains tax concessions in regard to the sale of a property in 2023?
Yes. This ruling applies for the following period: Year ending 30 June 20XX The scheme commenced on: 1 July 20XX
You acquired the property with your spouse as joint tenants. Your spouse died in 20XX. Your late spouse's 50% interest in the property transferred to you. You sold the property in March 20XX. You are a sole shareholder and director of a company along with your son. You completed your income tax return. Due to an oversight by your tax agent the small business capital gains tax concessions were not considered by you and the whole of the discount capital gain arising from the sale of the property was recorded in your income tax return for the year ended June 20XX. Your succession planning consultant has determined that an amended income tax return should be considered. You are now aware of the concessions and have determined you meet the basic eligibility and other relevant conditions under Division 152 of the ITAA 1997 to apply the 15-year exemption.
Income Tax Assessment Act 1997 section 103-25
The Commissioner will allow an extension of time under paragraph 103-25(1)(b) of the ITAA 1997 to make a choice to apply any available CGT small business concessions to the gain arising from the sale of the property. Detailed reasoning In regards to choices, section 103-25(1) of the ITAA 1997 states: A choice you make under this Part or Part 3-3 must be made: (a) By the day you lodge your income tax return for the income year in which the relevant CGT event happened; or (b) Within a further time allowed by the Commissioner Section 103-25(2) of the ITAA 1997 states the way you (and any other entity making the choice) prepare your income tax returns is sufficient evidence of the making of the choice. ATO Interpretative Decision ATO ID 2003/103 Capital gains tax: Choice and the small business roll-over, considers when a choice is made in relation to the small business CGT concessions.
It provides the general rule that a choice available under the CGT provisions, once made, cannot be changed. However, it also provides that a taxpayer who did not consider the CGT concessions has not made a choice can, if the Commissioner allows further time, later make a choice for a CGT concession and amend their return to reduce or disregard the capital gain. In determining whether to allow an extension of time, Commissioner considers the following factors: • whether there is evidence of an acceptable explanation for the period of extension requested and whether it would be fair and equitable in the circumstances to provide such an extension • whether there is any prejudice to the Commissioner if the additional time is allowed (however, the mere absence of prejudice is not enough to justify the granting of an extension) • whether there is any unsettling of people, other than the Commissioner, or of established practices • the need to ensure fairness to people in like positions and the wider public interest • whether there is mischief involved, and
• the consequences of the decision. Application to your circumstances 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, the capital gain was declared in the correct year and the concessions were not considered, and no choice was made regarding the small business concessions when the relevant income tax return was initially lodged. After taking into consideration your relevant circumstances, including the fact that no mischief is involved, there is no unsettling of other people or established practices the Commissioner will allow an extension of time under paragraph 103-25(1)(b) of the ITAA 1997 to make a choice to apply any available CGT small business concessions to the gain arising from the sale of the property.