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Edited version of your written advice
Authorisation Number: 1012722623712
Ruling
Subject: Small business CGT concessions - extension of time to acquire replacement asset
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?
Answer
Yes.
This ruling applies for the following period:
Year ending 30 June 2016
The scheme commences on:
1 July 2015
Relevant facts and circumstances
You have previously received additional extension of times to the replacement period, following the sale of the asset a number of years ago. The director of the trust was involved in an accident during the replacement period.
Following the accident, the director has been unable to fulfil their work duties, due to ongoing health issues, until earlier this year when the symptoms subsided.
Since this time, they have had a few months to find a replacement asset while in good health.
A number of potential replacement assets have been considered since the last extension of time was granted:
• The trust came close to making a substantial investment in a group earlier this year, however at the time the terms were not favourable. This option is currently being reconsidered.
• The possibility of setting up a wellness centre, which would meet the scheme's requirements.
• The opportunity to restart the business which the trust sold in a number of years ago, however there is currently an absence of attractive licences for sale at present, as retailers tend to put their licences on the market in the third or fourth quarter of the year.
A final one year extension has been requested, which would enable the director to search for a suitable replacement asset while in full health.
Relevant legislative provisions
Income Tax Assessment Act 1997 (ITAA 1997) section 104-185(1)(a)
Income Tax Assessment Act 1997 (ITAA 1997) section 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 the asset a few of years ago. Since then a number of potential replacement assets had been considered, however, due to various reasons beyond the control of the trust, 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.
Additional extensions of time to the replacement period have previously been requested. Since the last application, the director has continued to search for a suitable replacement asset however this has continued to be impacted on by their ongoing health issues.
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 to the date you requested.
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