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Edited version of your written advice
Authorisation Number: 1051291394054
Date of advice: 6 October 2017
Ruling
Subject: CGT - Small Business rollover – request for an extension of time
Question
Will the Commissioner exercise his discretion to extend the replacement asset period under section 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) until XX/XX/XXXX?
Answer
No.
This ruling applies for the following period:
Year ending 30 June 2018
Year ending 30 June 2019
The scheme commences on:
1 July 2017
Relevant facts and circumstances
You sold a business in the 2016 income year.
A capital gain was made on the sale of the business.
You chose to apply the small business rollover to the capital gain.
The explanation provided for not purchasing a replacement asset in the two year time period is that one of your children was born during this period and a business was purchased for another entity you are connected with. In addition to this you were required to spend time dealing with a matter concerning the business after it was sold.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 104-190(2).
Income Tax Assessment Act 1997 Paragraph 104-185(1)(a).
Reasons for decision
The small business rollover allows you to defer the capital gain made from a CGT event if you acquire one or more replacement assets and satisfy certain conditions.
Under paragraph 104-185(1)(a) of the ITAA 1997, the replacement asset period starts one year before, and ends two years after the last CGT event in the income year for which you obtain the small business roll-over. The Commissioner has discretion to extend the replacement asset period (subsection 104-190(2) of the ITAA 1997).
In your case, you obtained the small business roll-over in the 2016 income year. As you will not acquire the replacement asset within the relevant replacement asset period, the Commissioner may exercise his discretion under subsection 104-190(2) of the ITAA 1997 to extend the time period.
Commissioner’s Discretion
In determining if the discretion to extend the replacement asset period should be exercised, 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
● fairness to people in like positions and the wider public interest
● whether there is any mischief involved and
● the consequences of the decision.
In prior cases, the Commissioner has granted an extension of time where there have been special circumstances and an acceptable explanation for the period of extension requested. These can include, but are not limited to medical or financial issues, personal issues or natural disasters.
In your case, there were no medical, personal or financial issues that prevented you from seeking a replacement asset.
The explanation provided for you not being able to purchase a replacement asset is that you were required to spend time dealing with a matter concerning the business after it was sold along with purchasing a business for another entity you are connected with along with the birth of your child.
Having considered all the relevant factors, the Commissioner is of the opinion that you have not provided an acceptable explanation for the period of extension requested.
The Commissioner is of the opinion that you have had sufficient time to obtain a replacement asset.
Therefore, in your case, for the reasons discussed above, the Commissioner will not exercise the discretion under subsection 104-190(2) ITAA 1997 to extend the replacement asset period.
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