Edited version of private advice

Authorisation Number: 1051755145068

Date of advice: 17 September 2020

Ruling

Subject: Commissioner's discretion - SMB Rollover - Extension of Time

Question

Will the Commissioner exercise his discretion under subsection 40-365(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the time limit for a replacement asset to be acquired?

Answer

Yes.

Having considered your circumstances and the relevant factors, the Commissioner is able to apply his discretion under subsection 40-365(3) of the ITAA 1997 and allow an extension. Further information on what happens when you stop holding a depreciating asset can be found on our website ato.gov.au and entering Quick Code QC 45987 into the search bar at the top right of the page.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You operated a business.

Your business premises burnt to the ground with all plant and equipment being destroyed.

You received an insurance payout, which resulted in an assessable balancing charge.

You applied the balancing charge offset for the involuntary disposal of assets.

Implemented Covid 19 travel restrictions have resulted in delays to certifications as the relevant personal were restricted from traveling.

The electrical safety certificate and building occupancy certificate have been issued.

A submission to a Gas provider was made to facilitate the installation of a gas supply line and meter. You have been advised of a possible four-month delay for this request to be actioned due to the requirement of an engineer to travel to your location.

You have been in negotiations for replacement plant since June 20XX, the structural plan and layout of your new facility has been developed to include equipment relevant to the needs of the business whilst taking into consideration the utilities present or soon to be sourced.

Power supply to the building has been limited, this will be augmented through the installation of a solar panel system for the facility.

Identified issues in sourcing plant and equipment are as follows:

·         The equipment is not readily available in stock

·         It is big, heavy and expensive with so many variables to choose from, therefore it is made to order according to the customer's requirements. Some variables are weight, size, required output capacity, and connections capability.

·         Once options are selected engineered drawings are completed. Following a decision to order the equipment, a deposit is paid resulting in the equipment being built, shipped, installed, commissioned and tested on site which can take a further 9 months.

In April 20XX you contacted a supplier of the relevant equipment in your state, to establish a timeline for predicted delivery of ordered equipment. You were advised of a 12 month delay, you were also advised when taking into consideration the impact of Covid 19 this could be extended.

You do have options of sourcing equipment from overseas markets however you have concluded that any potential equipment must be inspected in country prior to purchase. With the Covid 19 restrictions and Department of Foreign Affairs and Trade (Australia) travel warnings you have stated that this is almost impossible currently.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 40-365(3)