Edited version of your private ruling

Authorisation Number: 1012464553157

Ruling

Subject: CGT - small business concessions, extension of time for replacement asset rollover

Question 1

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 by two years?

Answer

No

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

In year ended 30 June 20YY you sold your 50% shared holding in a small business which resulted in a capital gain.

After reducing the capital gain by applying the 50% discount and the small business active asset reduction, you elected to roll over the remaining capital gain.

Your replacement asset period ended year ended 30 June 20XX.

During the replacement asset period you have been examining and researching a number of locations and properties.

You were not aware of the timing of the replacement asset period and that it had expired year ended 30 June 20XX.

You are confident you will be able to exchange on a replacement asset by year ended 30 June 20ZZ.

You relocated following the sale of your 50% shared holding. This move required adjustment, and it has taken you some time to develop a proper understanding of the area and where is best to purchase business premises.

You have been hindered in your search for a replacement asset by demanding work and financial pressures.

You recently got married and you have been managing other personal matters outside your control which has been very demanding on your time.

Relevant legislative provisions

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

Reasons for decision

Detailed reasoning

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 under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 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.

Application to your circumstances

You disposed of your 50% shared holding in a small business in year ended 30 June 2010. You were required to acquire a replacement asset within two years of the disposal date.

In considering whether to exercise his discretion, the Commissioner needs to be satisfied that there were circumstances beyond your control that prevented you from finding a replacement asset within two years. You stated that the delay in purchasing a replacement asset was due to:

· You were unaware of the timing of the replacement asset period and that it had expired year ended 30 June 20XX.

· Your relocation. This move required adjustment, and it has taken you some time to develop a proper understanding of the area and where is best to purchase business premises.

· Demanding work and financial pressures.

· Your recent marriage and you have been managing other personal matters outside your control which has been very demanding on your time.

After considering both the relevant factors for determining whether to exercise the Commissioner's discretion and the specific circumstances of this case, we consider that your circumstances do not warrant an extension of time. This decision is based on the following reasons:

· In your case it is difficult to say there is evidence of an acceptable explanation for the period of extension requested. Although you have indicated that you have investigated possible business opportunities, you have not provided any documented attempts to acquire a replacement asset since the CGT event occurred.

· To allow an extension of time in your case is likely to unsettle people for the reasons discussed above, that is, lack of evidence of an acceptable explanation.

· While there is no suggestion of mischief in this case, it could not be considered fair to people in like positions to allow you an extension of time. Another application with similar circumstances would be denied.

· To allow an extension of time of two years would be to effectively allow a four year deferral of the capital gain. Such an extension of time is well in excess of usual practice without evidence of an acceptable explanation.

Therefore, the Commissioner will not exercise the discretion under subsection 104-190(2) of the ITAA 1997 to extend the period for acquiring the replacement asset.

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