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Edited version of private ruling
Authorisation Number: 1011573633849
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Ruling
Subject: Replacement asset
Question and answer
Will the Commissioner exercise his discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow you to acquire replacement assets by 30 June 2011?
Yes.
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts and circumstances
You sold your business.
You have made multiple attempts to purchase various businesses.
You have been counselled by your lending agency and your accountant against proceeding with the businesses that you have considered as they are overpriced.
You are interested to buy into a certain type of business as it is within your buying capability.
One of you is completing relevant qualifications.
Reasons for decision
Rollover for replacement assets
The small business asset rollover concession allows you to defer the making of a capital gain from a CGT event, in relation to one or more of your active business assets if you acquire replacement assets.
The effect of the small business asset rollover concession is that if no replacement asset is acquired, the option of a two-year deferral of the unrolled-over capital can be nominated. The small business rollover is available for capital gains from a CGT event.
For an asset to be a replacement asset, the taxpayer must acquire it during the period starting one year before, and ending two years after, the happening of the last CGT event in the income year for which the taxpayer claims the small business asset rollover.
Extensions of time
The Commissioner has a general discretion to extend the period for acquiring a replacement asset outside of the asset replacement period. The discretion is exercised with consideration to 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
- Where there is any prejudice to the Commissioner if the additional time is allowed
- Where 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 any mischief involved, and
- The consequences of the decision.
In your case, you have provided details of a number of businesses that you have inspected. The explanation for not investing in the businesses that you inspected are the market conditions for purchasing a small business are inflated, you have been counselled by your lending agency and your accountant against proceeding with the businesses that you have considered. One of you will complete their certification and you would like to purchase a business at that time as the cost of acquisition is considerably lower than other businesses.
The Commissioner will generally only exercise the discretion to allow an extension of time in circumstances where you can demonstrate that you sought to comply with your tax obligations, but were not able to comply through no fault of your own.
After considering your circumstances, it is considered that you have provided a reasonable explanation for the period of extension requested. The Commissioner will exercise his discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 to extend the period for you to acquire a replacement asset.
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