| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private advice
Authorisation Number: 1051561585727
Date of advice: 6 August 2019
Ruling
Subject: CGT 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 extend the replacement asset period following the sale of the Property?
Answer
Yes
Question 2
Can an entity, other than the Trust, acquire a replacement asset to prevent capital gains tax (CGT) event J5 from occurring at the end of the replacement asset period?
Answer
No
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ending 30 June 20XX
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The Trust entered into a contract to the Property.
Due to various special conditions, such as a development approval, settlement has been extended.
The Trust will make a capital gain on the disposal of the Property.
The Trust is a CGT small business entity.
The Trust has operated a business on the Property since its acquisition.
The Trust will elect to apply the CGT small business rollover to all or part of the capital gain made from the disposal of the Property.
The Trust is presently seeking suitable business opportunities to purchase, however will not enter into any formal negotiations until the proceeds from the sale of the Property are received following settlement.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 104-190(2)
Income Tax Assessment Act 1997 Section 104-197
Income Tax Assessment Act 1997 Subdivision 152-E
Reasons for decision
Question 1
Where the relevant conditions are met, a taxpayer can choose the CGT small business rollover under Subdivision 152-E of the ITAA 1997 to defer all or part of a capital gain. Further CGT events will happen where the rollover is chosen and certain conditions are not met within the replacement asset period.
The replacement asset period starts one year before and ends two years after the last CGT event that occurs in the income year for which you choose the roll over, or a longer period that the Commissioner allows.
In this case, having considered the relevant factors, particularly the delayed settlement, the Commissioner considers it would be appropriate to extend the asset replacement.
Question 2
Section 104-197 of the ITAA 1997 deals with the consequences that arise if a replacement asset is not acquired by the end of the replacement asset period. Subsection 104-197(1) of the ITAA 1997 states that CGT event J5 will occur if 'you' have not acquired a replacement asset within the replacement asset period. In this instance, 'you' refers to the entity that chose the small business rollover. There are no provisions that allow the replacement asset to be acquired by any other entity.
Accordingly, if a replacement asset is acquired by any entity other than the Trust, the rollover conditions will not be satisfied. This is the case even if the other entity is controlled by the same individuals.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
