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Edited version of your written advice
Authorisation Number: 1051242126202
Date of advice: 4 July 2017
Ruling
Subject: Capital Gains Tax - Replacement asset period - small business concessions
Question 1
Will the Commissioner exercise his discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension to the replacement asset period to 30 June 201G?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June 201B
Year ended 30 June 201C
Year ended 30 June 201D
Year ended 30 June 201E
Year ended 30 June 201F
The scheme commences on
1 July 201A
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You request an extension to the 2 year Capital Gains Tax (CGT) roll over relief available to small businesses.
You sold a business in 201A. Since then you have been actively searching for another business to buy and to rollover the proceeds of the sale of the old business into.
You have actively searched for a number of different businesses to reinvest in.
You made 2 offers on other businesses but lost out on both occasions after being one of the last of bidders.
Currently you are in discussions over two business sites. One is with a developer who has a property that would be suitable and requires council approval which will take some time.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 104-185(1)
Income Tax Assessment Act 1997 subsection 104-190(2)
Income Tax Assessment Act 1997 subsection 104-197(5)
Income Tax Assessment Act 1997 Subdivision 152-A
Reasons for decision
The small business roll-over allows you to defer the capital gain made from a Capital Gains Tax (CGT) event if you acquire one or more replacement assets and satisfy certain conditions. The conditions which must be met to obtain relief are set out in Subdivision 152-A of the ITAA 1997.
For you to obtain a roll-over, subsection 104-185(1) of the ITAA 1997 requires you to acquire a replacement asset, and that it be an active asset of yours, within a period starting one year before, and ending two years after the date of disposal of the original asset. The replacement asset period may be extended or modified by the Commissioner (subsections 104-197(5) and 104-190(2) of the ITAA 1997).
In determining whether to allow an extended asset replacement period the Commissioner considers the following factors:
● whether there is evidence of an acceptable explanation for the period of extension requested and whether it would be fair and equitable in the circumstances to provide such an extension
● whether there is any prejudice to the Commissioner if the additional time is allowed (however, the mere absence of prejudice is not enough to justify the granting of an extension)
● whether there is any unsettling of people, other than the Commissioner, or of established practices
● the need to ensure fairness to people in like positions and the wider public interest
● whether there is any mischief involved, and
● the consequences of the decision.
Having considered the relevant factors above, and the particular circumstances of your case, the Commissioner is able to apply his discretion under subsection 104-190(2) of the ITAA 1997 to allow a reasonable extension to the time limit. Allowing an extension is not prejudicial to the Commissioner in this case nor is it unfair to other people in similar positions.
The period of extension has a reasonable explanation given the circumstances and an extension will be granted until 30 June 201G.
Further issues for you to consider
This ruling has not considered your eligibility for the small business roll-over concession. You should ensure that you satisfy the basic conditions and any other conditions relevant for this exemption. More information is available in the publication Capital gains tax concessions for small business, which is available on the Australian Tax Office website www.ato.gov.au.
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