Edited version of private advice

Authorisation Number: 1051864511609

Date of advice: 8 July 2021

Ruling

Subject: Small business CGT tax replacement asset rollover relief - extension of time

Question

Will the Commissioner use discretion to extend the replacement asset period to 30 June 20XX pursuant to subsection 104-190(2) of the Income Tax Assessment Act 1997 in respect of the small business capital gains tax (CGT) replacement asset rollover relief?

Answer

Yes, having considered your circumstances and the relevant factors, the Commissioner will use discretion to grant you further time to extend the replacement asset period pursuant to subsection 104-190(2) of the Income Tax Assessment Act 1997 in respect of the small business CGT replacement asset rollover relief.

This ruling applies for the following period:

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You disposed of an asset.

The CGT event resulted in a capital gain to which you applied the roll over concession under small business roll-over, subdivision 152E of the Income Tax Assessment Act 1997.

Due to the current COVID19 pandemic restrictions, you were unable to travel.

You have actively attempted to plan a new business venture doing XYZ, however you do not find this to be a profitable business venture and have been unsuccessful in obtaining investors.

You have since, found a new business venture in and are waiting for an opportunity to travel back overseas to arrange the production line.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 104-190(2)

Reasons for decision

Subsection 104-190(2) of the Income Tax Assessment Act 1997 allows the Commissioner to extend the replacement asset period when you have been unable to replace an active asset based on your/ your entities individual circumstances and the facts.

The small business rollover concession allows you to defer a capital gain from the disposal of a business asset for a minimum of two years which allows the deferred capital gain to crystallise. This means you would make a capital gain equal to the deferred gain at the time of the disposal or change in use, in addition to any capital gain made on the disposal of the replacement or capital improved asset. The rules covering the small business rollover are contained in Subdivision 152-E of the Income Tax Assessment Act 1997. The small business rollover allows you to defer all or part of a capital gain made from a CGT event happening to an active asset.

Section 104-190 explains the replacement asset period is modified if your *capital proceeds for the *CGT event are increased under subsection 116-45(2) or 116-60(3) after the end of that period. Instead, you have until 12 months after you receive those additional proceeds to *acquire a replacement asset or incur *fourth element expenditure in relation to a *CGT asset, or do both.

Due to the current COVID19 pandemic and travel restrictions, it is fair and equitable in this circumstance to provide an extension.

In line with PS LA 2003/3 and based on the assumption that you are eligible to apply the small business rollover relief concession, we grant an extension to apply the rollover concession. If you do not apply this concession by the new agreed date, a capital gain will arise, which means you must then include the gain in your assessable income on your income tax return.