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Ruling

Subject: CGT small business concessions

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 period:

Year ending 30 June 2013

The scheme commenced on:

1 July 2012

Relevant facts and circumstances

You made a capital gain of $X and elected to take advantage of the small business rollover.

You have been actively seeking an additional business to purchase as a replacement asset and expand your business during the asset replacement period.

Following the rollover you initiated a mail out to prospective businesses to determine their interest in selling their business to you, however you received no interest at the time.

Recently you initiated a second mail out to prospective businesses in the area. You received a response from a number of parties; however negotiations were not successful in these cases.

You have requested an extension to the asset replacement period to allow time for the recipients of the second mail out to respond to your proposal.

Relevant legislative provisions

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

Reasons for decision

In order to apply the small business rollover, a replacement asset must be acquired within 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.

You rolled over a capital gain under the small business rollover. You have been unable to acquire an additional business due to a lack of suitable businesses for sale in your area. While seeking a new practice, you took the step of initiating contact with local businesses who may consider selling their practice to you. We consider that you have made ongoing efforts to acquire a replacement asset.

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

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