Edited version of private advice

Authorisation Number: 1051897153660

Date of advice: 21 September 2021

Ruling

Subject: Small business concessions - extension of time - replacement asset

Question

Will the Commissioner exercise the discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the time limit to the 8 September 20XX to extend the replacement asset period?

Answer

Yes. Having regard to the particular circumstances of your case and the information provided, the Commissioner has applied the discretion and will extend the replacement asset period to 8 September 20XX

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

30 October 20XX 30 October 2020

Relevant facts and circumstances

•         The Taxpayer is a Discretionary Trust;

•         On 30 October 20XX the Taxpayer disposed of a business resulting in a capital gain;

•         The gross gain derived by the Taxpayer was $1,115,302;

•         The Taxpayer concluded that they satisfied the basic conditions to apply the small business concessions in Division 152;

•         After application of the 50% discount and the active asset reduction (Subdivision 152-C) the gain was reduced to $278,826;

•         When the 20XX income tax return was prepared in early 20XX the Taxpayers were advised of the replacement asset rollover in Subdivision 152-E and prepared the 20X income tax return accordingly. At the time the Taxpayer was very keen to acquire another business;

•         The Taxpayer took professional advice on the requirements that they needed to acquire a

replacement active asset prior to 30 October 20XX or that CGT event J5 would occur.

•         Immediately after the 20XX Trust return was prepared and the Taxpayer was made aware of the replacement asset rollover the Taxpayer began to search for a replacement asset, the Taxpayer also contacted their tax agent, to discuss several various potential business purchases and industries via telephone and email. From July 20XX to August 20XX The Taxpayer approached several businesses for sale although through due diligence and negotiations in the sales process the offers were subsequently withdrawn.

•         On 17 August 20XX a business broker introduced the Taxpayer to the management rights of another business. The Taxpayer conducted financial due diligence and made an offer in late August 20XX. The management rights business contract was executed on 8 September 20XX with the Taxpayer being the purchaser. The contract was due to settle on 30 November 20XX, but legal due diligence issues caused delays. Due to the Christmas period and COVID-19 bank financing issues, settlement was delayed until 12 February 20XX.

Relevant legislative provisions

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