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Edited version of your written advice
Authorisation Number: 1051246988015
Date of advice: 06 July 2017
Ruling
Subject: Commissioner's discretion: replacement asset period
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 XXXX?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June XXXX
Year ended 30 June XXXX
Year ended 30 June XXXX
Year ended 30 June XXXX
The scheme commences on:
1 July XXXX
Relevant facts and circumstances
You request an extension to the 2 year Capital Gains Tax (CGT) roll over relief available to small businesses.
In mid XXXX you engaged your current tax agent to take over your tax affairs from XXXX onwards.
You sold a business in XXXX and a review of your situation for the year ended 30 June XXXX found that you could apply the small business concession regarding the sale of an active asset.
Due to difficulties with your previous tax agent and the preparation of your income tax returns, you were unable to act on this until when the advice was given and your income tax returns lodged. This meant that you had only nine months to act on the rollover.
For personal reasons you were also away overseas during this period and you did not return to Australia until mid April XXXX.
Since arriving back in Australia you have been attempting to find a replacement asset but have been unable to do so. You have a strong history of running a business in Australia and want to continue this. You have requested a twelve month extension until 30 June XXXX to find a replacement asset.
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
Income Tax Assessment Act 1997 Subdivision 152-E
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.
According to Australian Tax Office records (income tax returns), the business operated from XXXX until it was sold in XXXX.
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 circumstances.
The period of extension has a reasonable explanation given the circumstances and an extension will be granted until 30 June XXXX.
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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