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Ruling

Subject: Small business CGT concessions - extension of time to acquire replacement asset

Question

Will the Commissioner exercise his discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the replacement asset period?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commenced on:

1 July 2012

Relevant facts and circumstances

The trust disposed of an asset.

The trust elected to take advantage of the small business rollover contained in subdivision 152-E of the ITAA 1997.

A number of potentially suitable replacement assets were identified, and negotiations entered into during the asset replacement period. However, none of the deals were successful due to circumstances beyond your control.

After entering into negotiations for the purchase of a replacement asset, the director of the corporate trustee was involved in an accident where they sustained injuries and were hospitalised

As a result of the director's injuries, you have been unable to look further into any other replacement assets.

Relevant legislative provisions

Income Tax Assessment Act 1997 paragraph 104-185(1)(a)

Income Tax Assessment Act 1997 subsection 104-190(2)

Reasons for decision

The rollover conditions applicable to the small business rollover require that a replacement asset must be acquired within the replacement asset period. The replacement asset period starts one year before and ends two years after the relevant CGT event. However the Commissioner may extend the replacement asset period in certain circumstances (subsection 104-190(2) of the Income Tax Assessment Act 1997).

The relevant factors in determining whether to extend the replacement asset period are:

· 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

· a consideration of the consequences.

The trust disposed of a business. Since then a number of potential replacement assets had been considered, however, due to various reasons beyond your control, the purchase of these assets was not able to proceed. The director of the corporate trustee sustained injuries as a result of an accident and this has hindered further progress in relation to obtaining a replacement asset.

Having considered the relevant factors above, and the particular circumstances of this case, the Commissioner has applied his discretion and will extend the asset replacement period.

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