Edited version of private advice

Authorisation Number: 1051961136891

Date of advice: 18 March 2022

Ruling

Subject: CGT - small business roll-over extension of time

Question

For the purposes of applying the small business roll-over in Subdivision 152-E of the Income Tax Assessment Act 1997 (ITAA 1997), will the Commissioner exercise the discretion in subsection 104-190(2) of the ITAA 1997 to extend the replacement asset period to 1 October 20XX?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 October 20XX

Relevant facts and circumstances

You purchased a property and contracts were signed on Date X.

You moved to that property and began to prepare your original property for sale.

Covid-19 restrictions limited opportunities to attend to the tasks required and you were advised that agents would not be able to bring potential buyers for inspections under the restrictions.

There were various stages of lockdown and limited travel.

You signed an authority to sell with your agents when restrictions eased, and the property was sold on Date Y.

There was a capital gain on the sale.

You are a small business entity with an aggregate turnover of less than $Xmillion and you satisfied the maximum net asset test just before the sale of the property.

The property satisfied the active asset test.

Relevant legislative provisions

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

Income Tax Assessment Act 1997 Subdivision 152-A

Income Tax Assessment Act 1997 Subdivision 152-E

Reasons for decision

All references made in these reasons for decision are to the Income Tax Assessment Act 1997 (ITAA 1997)unless otherwise stated.

Summary

The Commissioner will exercise the discretion in subsection 104-190(2) to extend the replacement asset period to Date X.

Detailed reasoning

The small business roll-over in Subdivision 152-E allows you to defer all, or part of a capital gain made from a CGT event happening to an active asset of yours.

In accordance with section 152-410 you can choose to obtain the roll-over if the basic conditions in Subdivision 152-A have been met. Those basic conditions have been met.

If you choose to apply the small business roll-over, you must have acquired a replacement asset before the end of the replacement asset period. The replacement asset period is the period starting one year before and ending two years after the last CGT event in the income year for which you obtain the roll-over.

The Commissioner may extend the replacement asset period in certain circumstances.

In determining whether to exercise the discretion to extend the asset replacement period, we have considered the following factors:

•         there should be evidence of an acceptable explanation for the period of extension requested and that it would be fair and equitable in the circumstances to provide such an extension

•         account must be had to any prejudice to the Commissioner if the additional time is allowed (however, the mere absence of prejudice is not enough to justify the granting of an extension)

•         account must be had of any unsettling people, other than the Commissioner, or established practices

•         whether the extension is fair to people in like positions and the wider public interest

•         whether there is any mischief involved, and

•         a consideration of the consequences of the decision.

Having considered the relevant factors above and your specific circumstances the Commissioner will exercise the discretion in subsection 104-190(2) to extend the replacement asset period to Date X.