Edited version of your written advice

Authorisation Number: 1012831197058

Date of advice: 29 June 2015

Ruling

Subject: CGT - small business concessions - extension of time to replacement asset period

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 period

Year ending 30 June 2015

The scheme commences on

1 July 2014

Relevant facts and circumstances

You disposed of a CGT asset to an unrelated third party in 20XX (capital gain tax (CGT) event).

You applied the small business concessions, including the small business rollover, deferring the capital gains that arose from the CGT event until 20XX.

You have been actively seeking a replacement asset and to date you have been unable to find a suitable replacement asset.

In 20XX, one director was hospitalised and underwent surgery. The other director cared for that director post-surgery and the Director has experienced a slow recovery. The director's surgery and recovery time have caused delays in finding a suitable replacement asset.

You are continuing to seek a suitable replacement asset.

Relevant legislative provisions

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

Reasons for decision

Where a taxpayer elects to take advantage of the small business rollover, there are rollover conditions that must be satisfied by the end of the replacement asset period. This 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 rollover. 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 rolled over a capital gain under the small business rollover for a CGT event that occurred in February 20XX. Since that time you have been actively seeking a replacement asset. The hospitalisation and recovery of one of the directors has caused delays in acquiring a replacement asset, however you are continuing your search for a suitable replacement asset.

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 20XX.

Further issues for you to consider

This ruling has not fully considered your eligibility for the CGT small business concessions; it has only addressed eligibility under the specified provisions of the ITAA 1997. You should ensure that you satisfy all the basic conditions and other relevant conditions for eligibility. More information is available in the publication Advanced guide to capital gains tax concessions for small business 2013-14 (NAT 3359), which is available on our website www.ato.gov.au.