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Edited version of your written advice
Authorisation Number: 1051198837734
Date of advice: 6 March 2017
Ruling
Subject: CGT - small business concessions - extension of asset replacement 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 to XX April 20XX?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June 2015
Year ended 30June 2016
Year ended 30 June 2017
Year ended 30 June 2018
The scheme commences on:
1 July 2014
Relevant facts and circumstances
In the 20XX-XX financial year you elected to use the small business rollover to defer three capital gains that you made.
The dates of the capital gains tax (CGT) events were as follows:
● XX November 20XX - business in the name of A
● XX February 20XX - business in the name of B
● XX April 20XX - business in the name of B
You are the sole director of A.
Medical reasons delayed your ability to commence your search for suitable replacement assets.
You have however, commenced your search and you have considered a number of potential replacement assets within the replacement period; however you were unable to negotiate a suitable acquisition within the replacement period.
You are continuing to look for suitable replacement assets which are within your price range and with a business structure that matches your needs.
You have requested an extension to the three asset replacement periods to XX April 20XX.
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 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 rolled over a capital gain under the small business rollover during the 20XX-XX financial year. You have been unable to acquire a suitable replacement asset within the replacement period. You have however, considered the purchase of a number of businesses. 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 to XX April 20XX.
Further issues for you to consider
This ruling has not considered your eligibility for the small business rollover. You should ensure that you satisfied the basic conditions and the other conditions relevant for the rollover. More information is available in the publication Capital gains tax concessions for small business 2016, which is available on our website www.ato.gov.au.