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Edited version of your written advice
Authorisation Number: 1051424253740
Date of advice: 1 September 2018
Ruling
Subject: Income tax – small business concessions – replacement asset rollover
Question
Can the purchase of a car be a replacement asset under section 152-420 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes. A basic requirement for an asset to be eligible to be a replacement asset is that it must be an active asset. To be an active asset, the asset must be owned by a small business entity and be used or held ready for use in the course of carrying on a business. Section 108-5 of the ITAA 1997 includes a car in the definition of a CGT asset. In this case you intend to use the motor vehicles in your small business; therefore the motor vehicles you purchase are eligible replacement assets.
This ruling applies for the following period:
Year ending 30 June 2018
Year ending 30 June 2019
The scheme commences on:
1 July 2017
Relevant facts and circumstances
The company made a capital gain of $XX in the 20XX financial year.
The company elected to utilise the small business rollover to defer part of this capital gain.
The company is pursuing X as a business.
The company intends to purchase two vehicles to facilitate this business.
There will be X amount of private use on the vehicles.
The company is a small business entity.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 152-420
Income Tax Assessment Act 1997 Section 108-5