Edited version of private advice

Authorisation Number: 1052286691801

Date of advice: 6 August 2024

Ruling

Subject: CGT - small business concessions

Question

Will the Commissioner exercise the discretion in subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the replacement asset period for the small business rollover to 30 June 2025?

Answer

Yes.

This ruling applies for the following period:

Year Ending 30 June 2025.

The scheme commenced on:

1 July 2021

Relevant facts and circumstances

The company brought the property in February 20XX.

The company is a primary production business which has cattle and produces grains.

The company sold the property in May 20XX.

The company applied the small business rollover in their 20XX tax return.

Since the sale of the property the managing director/shareholder of the company (Person A) has actively been seeking an appropriate property to purchase and has physically inspected 9 properties in person at various geographical locations.

At this time no suitable property has been found.

This is primarily due to the inadequate size of properties available on the market and shortage of a suitable enterprise mix of grazing and farming.

Person A is also mindful that a suitable property will need to provide an adequate return on investment. This is not something that available properties have been calculated to be able to provide based on current market values.

The company is requesting an extension till 30 June 2025.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 104-190(2)

Income Tax Assessment Act 1997 Subdivision 152-E

Reasons for decision

As outlined in subsection 104-190(1A) of the ITAA 1997, the replacement asset period is the period starting one year before the last CGT event in the income year for which you obtain the roll-over and ending 2 years after the last CGT event in the income year for which you obtain the roll-over.

As outlined in subsection 104-190(2) of the ITAA 1997, the replacement asset period may be extended by the Commissioner.

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 mischief involved, and

•         the consequences of the decision.

Application to your circumstances

In this case the company sold the property in May 20XX and applied the small business rollover. The replacement asset period ended in May XX. In this time, the company has looked at a number of properties, but they have either been unsuitable due to the sale price versus the potential return on profit or work that would need to be done to make the property suitable for the company.

Accordingly, the Commissioner has considered your facts and circumstances will exercise the discretion under paragraph 124-75(3)(b) of the ITAA 1997 and extend the period for you to acquire replacement assets to 30 June 2025.

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