Edited version of your private ruling

Authorisation Number: 1012520018695

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?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 2014

Year ending 30 June 2015

The scheme commenced on

1 July 2013

Relevant facts and circumstances

You ran a franchise which was sold in 2011.

The sales contract included a restraint of trade clause.

The Deed of Surrender included a restraint of trade clause.

You were looking at buying a business in 2012 and spent four months in negotiations but due to the restraints of trade that were entered into you were unable to purchase the business.

You looked into various other business ideas but a lack of training in these areas resulted in an inability to purchase them.

Throughout 2013 you were in negotiations with another business owner however the sale was not approved due to lack of experience.

Currently, you are completing courses with a franchise with the intention of purchasing a new shop in 2014.

The franchise is currently negotiating the lease for your new shop.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 104-10.

Income Tax Assessment Act 1997 Section 104-185.

Income Tax Assessment Act 1997 Section 104-190.

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 Income Tax Assessment Act 1997 (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. Subsection 104-190(2) states that the Commissioner may exercise his discretion to extend those time limits.

You disposed of your business in 2011. The two year limit in which to find a replacement consequently will expire in 2013.

During this period, you have made numerous efforts to secure a replacement business. For a variety of reasons, to date you have been unable to find a suitable replacement asset.

In determining if the discretion would be exercised the Commissioner has considered the following factors:

· evidence of an acceptable explanation for the period of the extension requested (and whether it would be fair and equitable in the circumstances to provide such an extension)

· prejudice to the Commissioner which may result from the additional time being allowed (but the mere absence of prejudice is not enough to justify the granting of an extension)

· unsettling of people, other than the Commissioner, or of established practices

· fairness to people in like positions and the wider public interest

· whether any mischief is involved, and

· consequences of the decision.

Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 104-190(2) and 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 positions.

The period of extension has a reasonable explanation given the circumstances and an extension will be granted.