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Edited version of your private ruling
Authorisation Number: 1012611260596
Ruling
Subject: Small business rollover concession extension of time
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?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June 2014
Year ended 30 June 2015
The scheme commences on
1 July 2013
Relevant facts and circumstances
You sold a CGT asset under Contract for Sale.
A condition of the sale was that you agreed to a minimum two year term of continual employment, managing the business for the purchaser, and a restraint of trade which precluded you from seeking new business ventures within the two year period.
Your replacement asset period will end two years from the contract of sale.
Your restraint of trade clause and period of employment for the purchaser prevented you from acquiring a competing business.
A breach of the restraint of trade clause attracted a penalty of an amount of the sale proceeds.
You have actively looked for a replacement asset by researching multiple business opportunities for sale on the Australian Investment Network. You were particularly interested in a particular business however acquiring the business was unsuccessful due to the failure to meet specific conditions.
You are no longer employed by the purchaser.
Relevant legislative provisions
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) ITAA 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. Due to the requirement for you to manage the business for the purchaser for a period of two years following the sale, and the inclusion of a restraint of trade clause for the two years following the sale, you have been unable to purchase a replacement asset during the two year replacement asset period.
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.