Edited version of private advice

Authorisation Number: 1052231097364

Date of advice: 19 March 2024

Ruling

Subject: CGT - extension of time

Question

Will the ATO exercise its discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension to the replacement asset period?

Answer

Yes. The Commissioner will exercise the discretion under subsection 104-190(2) of the ITAA 1997 to extend the period for acquiring your replacement asset. Acknowledging that:

•         The process for finding a replacement asset began within the replacement asset period

•         The delay in acquiring the replacement asset was beyond your control

•         You are currently in the process of acquiring a replacement asset.

The Commissioner considers your circumstances an acceptable reason to extend the replacement asset period.

This ruling applies for the following period

Year ending DD MM 20YY to DD MM 20YY

The scheme commences on:

DD MM 20YY

Relevant facts and circumstances

On DD MM 20YY you entered into a contract for the sale of your business. The settlement date was DD MM 20YY

Since the business was sold, you contacted numerous real estate agents and building companies in an attempt to either acquire or lease suitable premises to establish a new business. For a variety of reasons however, none of the premises you have so far inspected and the additional properties that you have enquired about have suited your business requirements. In addition, a restriction of trade clause regarding the sale of the business has limited new set-up options.

The lack of a suitable site has meant that you have been unable to purchase new equipment as replacement assets.

You are currently negotiating a long-term lease over premises that are still under construction and which are not scheduled to be completed until the end of the year.

Assuming these negotiations are successful, and the building is completed on schedule, you will be in a position to acquire replacement assets from the end of the year onwards as part of the fit out of the new dental clinic.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-190

Income Tax Assessment Act 1997 section 152-140

Reasons for decision

Under the provisions in section 152-410 of the ITAA 1997 you can choose to obtain a roll-over, and also obtain the roll-over even if you have not yet acquired a replacement asset.

You have chosen to obtain a roll-over for the sale of your business assets because it was your intention to find a replacement asset.

Under section 104-190 of the ITAA 1997, you are given two years to find a replacement asset to apply the roll-over of the sale of your assets.

You have not been able to find a replacement asset within the two-year replacement asset period despite your attempts to do so. Because of the specific requirements of running your business, none of the properties has suited your specifications. There have also been several circumstances outside of your control that prevented you from obtaining another asset.

Under the provisions in subsection 104-190(2) of the ITAA 1997, the Commissioner has the discretion to extend the replacement asset.

You are currently in negotiations to enter into a lease to move into a new building, but the building is still under construction, and the projected completion date will be approximately towards the end of the year. This is not factoring any delays in construction and purchasing replacement assets.

Because of your circumstances, the Commissioner will find it suitable to extend the replacement period by two years.