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Edited version of your written advice
Authorisation Number: 1051182843691
Date of advice: 19 January 2017
Ruling
Subject: Capital gains tax -small business concession -replacement asset -extension of time
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, to DDMMYY
This ruling applies for the following period
Year ending 30 June 2017
Year ending 30 June 2018
The scheme commences on
1 July 2016
Relevant facts
You disposed of a capital gains tax (CGT) asset in 201X.
You applied the small business concessions, including the small business retirement exemption rollover for an amount of the capital proceeds. You also deferred the remaining capital gain that arose from the CGT event until 201Z.
You have been actively seeking a replacement asset and to date you have been unable to find a suitable replacement asset.
In 201Y, the sole director suffered a medical emergency and was hospitalised.
The Director has experienced a slow recovery. The director's medical illness has caused delays in finding a suitable replacement asset.
The director expects to make a full recovery.
You are continuing to seek a suitable replacement asset.
You have undertaken due diligence on a number of replacement assets, however for a variety of reasons have decided not to proceed with a purchase at this stage.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 104-190(2)
Reasons for decision
Where an election is made 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.
In your situation, since the disposal of the CGT asset you have been actively seeking a replacement asset. The hospitalisation and recovery of the sole director 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.