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Edited version of your written advice
Authorisation Number: 1013031177022
Date of advice: 8 June 2016
Ruling
Subject: CGT - SBC - replacement asset - EOT
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 period:
Year ending 30 June 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
You made a capital gain and elected to take advantage of the small business rollover.
You have been in discussions with X to buy into their business for many months.
X put a proposal in writing to the director for the purchase.
The purchase will not happen within 2 years of the sale of the asset.
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) 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. You have been in discussions to purchase a replacement asset for number of months, and recently received a letter of proposal. The purchase is not yet finalised, you envisage this will happen shortly. We consider that you have made ongoing efforts to acquire a 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.