Four other members of her family each purchased a unit in the same block of units.

In January 2016, the applicant, Ms Simpson, entered a contract for the sale of her unit. Settlement for the property took place on 21 December 2016.

Ms Simpson included the capital gain she had made on the sale of the unit in the income tax return she lodged in respect of the 2016 income year.

The Commissioner of Taxation assessed the capital gains as part of Ms Simpson’s income for the 2016 year. He issued his assessment on 11 July 2017, and on 21 July 2017, Ms Simpson objected to the assessment.

She did so submitting that the commissioner should have assessed capital gains tax on the basis that the unit were an asset in an SMSF.

The commissioner disallowed her objection in an objection decision dated 12 September 2017.

On 22 August 2018, she complained to the Inspector General of Taxation (IGT) about the objection decision, but he advised her on 22 August 2018 that he did not have authority to further review it.

The IGT’s advice was that she seek review of the objection decision in the Tribunal or lodge an appeal against it in the Federal Court. As she was outside the 28-day time limit to apply to the Tribunal, Ms Simpson applied for an extension of time within which to lodge her application for review of the objection decision.

AAT deputy president Stephanie Forgie decided to refuse the application to extend the time in which she could lodge an application to review the commissioner’s objection on the basis that it did not have reasonable prospects of success.

In its decision, the AAT said that if Ms Simpson’s unit had in fact been held by an SMSF that was regarded as a complying superannuation fund, section 295-85 and 295-90 of the Income Tax Assessment Act 1997 would have modified the application of ITAA97 in relation to the assessment of CGT.

“Ms Simpson submits that the commissioner had a discretion to treat her asset as held by a[n] SMSF and by a complying superannuation fund. The only relevant discretion that I have found is that of the regulator under s[ection] 43(1)(b) of the SIS Act. In the case of a[n] SMSF, the regulator would be the commissioner,” Ms Forgie said.

“That is the point at which Ms Simpson’s argument must fail. The commissioner has a discretion to treat a[n] SMSF as a complying superannuation fund with the consequence that modified CGT rules apply. The commissioner does not have any discretion to deem a[n] SMSF to have existed.”

The AAT said that if Ms Simpson wanted the benefit of the modified CGT rules that would apply to the sale of the unit, she should have established an SMSF, followed the relevant rules and transferred the ownership of the unit to the SMSF.

“She did none of that in all the years she owned the unit. Therefore, the ordinary CGT rules applying to taxpayers generally apply to her and were applied by the commissioner,” the AAT said.

Commenting on the case, Bruce Bardell & Associates director Bruce Bardell said that with this particular case, “there was no escape from the fact that ownership of the property was clearly with [the applicant], and that she could not now ‘change history’ to say something different”.

“The Tribunal spent two pages considering if there was any way that an appeal could be successful. Sadly, there was no path to success,” he said.

Mr Bardell said that this case highlights some of the important requirements set out in the SIS Act for setting up and running an SMSF including having a trust, trustees, accounts and statements each year, contributions, notice of complying status from the regulator and audit reports.

“She did none of that in all the years she owned the unit,” he said.

“The Tribunal recognised the earnestness of [the applicant’s] views by making a detailed analysis of her position in a respectful way. Many might say that this is a case that should never have reached a hearing.”