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Edited version of your written advice
Authorisation Number:
Date of advice: 10 February 2017
Ruling
Subject: Capital gains tax - replacement asset rollover - extension of time
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 ending 30 June 2017
The scheme commenced on:
1 July 2016
Relevant facts
The Company made a capital gain in January 20XX and elected to take advantage of the small business rollover. (The Company)
The Company has been considering acquiring a replacement asset in which to operate the business.
The Company has considered a number of locations that would best suit the business and considered that ‘A’ would be the most appropriate.
The Company received a lease proposal from the lessor in late 20YY.
The Company accepted the terms of the lease in early 20ZZ.
The terms of the lease required some further negotiation and the lease will commence a short time later in 20ZZ.
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.
The Company disposed of the business in 20XX. The Company have been in discussions to acquire a replacement asset for number of months and received a lease proposal in late 20YY. The lease will be entered into in early 20ZZ. 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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