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Ruling

Subject: CGT small business concessions

Question

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 to the date you purchased your new business?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 2008

Year ended 30 June 2009

Year ended 30 June 2010

The scheme commenced on:

1 July 2007

Relevant facts and circumstances

You sold your business during the X income year.

You elected to use the small business rollover relief in relation to the capital gain made on the sale of the business.

You purchased a new business, over two years later in Y income year.

You are requesting an extension of time to the replacement asset period to the date of the purchase of the new business to enable you to treat the new business as a replacement asset.

The franchisor of the new business required a staff member, to undertake training in order to maintain their customer service expectations prior to you signing a contract with them. This delayed the signing of the contract

Other reasons for the delay in purchasing the new business included:

· during the relevant period a staff member was in the midst of a personal issues

· your staff member was also assisting in the care of a family member over the past four years, following their decline in health.

Relevant legislative provisions

Income Tax Assessment Act 1997 paragraph 104-185(1)(a)

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

Reasons for decision

In order to apply the small business rollover, a replacement asset must be acquired within two years after the relevant CGT event. However the Commissioner may extend the replacement asset period in certain circumstances (subsection 104-190(2) of the Income Tax Assessment Act 1997).

The relevant factors in determining whether to extend the replacement asset period are:

· there should be evidence of an acceptable explanation for the period of extension requested and that it would be fair and equitable in the circumstances to provide such an extension

· account must be had to any prejudice to the Commissioner which may result from the additional time being allowed, however the mere absence of prejudice is not enough to justify the granting of an extension

· account must be had of any unsettling of people, other than the Commissioner, or of established practices

· there must be a consideration of fairness to people in like positions and the wider public interest

· whether there is any mischief involved

· a consideration of the consequences.

You disposed of your business on during the X income year. Due to delays caused by franchisor requirements and the personal circumstances of your only employee, you did not acquire your new business within two years of the disposal of the original business.

Having considered the relevant factors above, and the particular circumstances of your case, the Commissioner has applied his discretion and will extend the asset replacement period to the purchase date of the new business.