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Edited version of private advice
Authorisation Number: 1051886812692
Date of advice: 26 August 2021
Ruling
Subject: Extension of replacement asset period
Question
Will the Commissioner exercise his discretion under section 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the replacement asset period to X XX 20XX?
Answer
Yes. Having regard to your full circumstances and the acceptable explanation of the steps you have taken to acquire a replacement asset, the Commissioner considers the extension would be fair and equitable for the purposes of section 104-185(1) of the ITAA 1997. Further information on the small business rollover can be found on by searching 'QC52291' on ato.gov.au.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You are a partner of a partnership operating a XX business (the Partnership).
On XX XX 20XX, you sold X% of your ownership interest in the partnership (the Sale). You held X% ownership interest in the partnership prior to the Sale and held X% ownership interest after the Sale.
You elected to apply the Capital Gains Tax (CGT) Small Business roll-over under Subdivision 152-E of the ITAA 1997 and disregarded a CGT amount of around $XX until XX XX 20XX.
Due to the effect of COVID-19, the Partnership undertook a review of its organisational structure which resulted in one partner commence planning transition to retirement (the Retiring Partner).
In XX 20XX, you were identified as a buyer for part of the Retiring Partner's ownership interest, to be sold on X XX 20XX. You agreed to purchase X% of the ownership interest from the Retiring Partner.
Between XX and XX 20XX, you and the Retiring Partner disagreed on the valuation methodology detailed in the partnership deed and sought advice regarding the valuation of ownership interest being sold. During this period, you and the Retiring Partner requested alternative valuation methods, in order to reach a final agreement. As a result, the intended transaction on X XX 20XX did not proceed.
On X XX 20XX, you and the Retiring Partner agreed to transact on X XX 20XX, using an agreed alternative valuation method.
On X XX 20XX, you signed a letter of offer agreeing to purchase the ownership interest from the Retiring Partner, effective on X XX 20XX.
On X XX 20XX, the ownership interest was transferred to you.
On X XX 20XX, you transferred $X to the Retiring Partner to settle the transaction.
You have stated you met the 'basic conditions' for CGT small business concession under section 152-10 of the ITAA 1997 and satisfied the maximum net asset value test at paragraph 152-10(1)(c) of the ITAA 1997.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 104-185
Income Tax Assessment Act 1997 Subsection 104-190
Further issues for you to consider
We have limited our ruling to the questions raised in your application. There may be related issues that you should consider including:
• CGT event J6 under section 104-198 of the ITAA 1997 when there is a difference between
the amount of the capital gain that you disregarded under Subdivision 152-E of the ITAA 1997, and
the amount incurred for the replacement asset.