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Edited version of private advice
Authorisation Number: 1051634611047
Date of advice: 12 February 2020
Ruling
Subject: CGT - small business concessions - rollover - EOT
Question
Will the Commissioner exercise the discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension to the replacement asset period to XX March 20XX?
Answer
Yes
Having considered your circumstances and the relevant facts the Commissioner considers it appropriate to grant an extension of the replacement asset period to XX March 20XX.
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 on our website ato.gov.au by searching Quick Code QC 52266
This ruling applies for the following periods:
Year ending 30 June 2020
Year ending 30 June 2021
The scheme commences on:
1 July 2014
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
In the 20XX-XX financial year you elected to use the small business rollover to defer a capital gain of $X that you made. The date of the capital gains tax (CGT) event was XX June 20XX.
The Commissioners discretion was applied on XX January 20XX, allowing an extension of time under subsection 104-190(2) of the ITAA 1997 to XX February 20XX.,
Mid-20XX you commenced a new business, B Pty Ltd (the company) with yourself and your spouse, C being the shareholders.
On XX July 20XX, the Relevant Court of Australia approved specific Orders between yourself and your estranged spouse, D.
Per the Orders D is to transfer all their right, title and interest in the following jointly held properties:
(i) Y property; and
(ii) Z property.
The Y property is valued at approximately $X, with a mortgage registered against its title of approximately $X.
The Z property is valued at approximately $X, with a mortgage registered against its title of approximately $X.
Whilst the Consent Orders set out the division of property between you and D, your bank (the bank) was unwilling to remove D's name from the mortgages securing the Y and Z properties until you were able to provide at least two years of financial statements for B Pty Ltd, as the bank considers you to be self- employed under their lending policy.
You and C acquired a property (M property) on XX November 20XX for $X with the intention of using the property in B Pty Ltd's business.
At the time M property was acquired, you were unable to acquire finance and provide security for M property on your own (due to the bank's lending policy). C was included on the lending application and acquired a half interest in M property.
After 30 June 20XX, two years of financial statements for B Pty Ltd will be available and you will be in a position to refinance your borrowings with the bank. Allowing you to remove D from the titles of the Y and Z properties and use the equity in those properties to acquire C's half share in M property, making you the sole owner of M property.
M property
At acquisition, a tenant occupied the entire M property under a commercial lease signed by the tenant and the former owner of M property.
You and C have entered into discussions with the tenant asking them to agree to surrender part of the available floor space for you to use in B Pty Ltd's business prior to the expiration of their lease in return for a reduction in rent.
The existing tenant's lease is due to expire on XX September 20XX, with an option to renew for at least X months, but no more than X months. This would allow B Pty Ltd to occupy the entire M property from as early as XX September 20XX, or the existing tenant may be allowed to remain as a tenant, occupying less than 50% of the available floor space.
Rental income from the existing tenant is currently $X per annum.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 104-190(2)