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Edited version of private advice
Authorisation Number: 1052307545597
Date of advice: 20 September 2024
Ruling
Subject: CGT - small business rollover
Question
Will the Commissioner exercise his discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 to extend the replacement asset period to XX June 20XX.
Answer
Yes, having considered your circumstances the Commissioner will exercise discretion under subsection 104-190(2) of the ITAA 1997 to extend the period to XX June 20XX.
This ruling applies for the following period:
Year ended XX June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
You are a private company who conducts a construction business and a cafe business.
On XX June 20XX you signed a contract for the sale of an asset.
On X August 20XX you signed a purchase contract for a block of land.
The land was subdivided into 4 separate blocks.
Three of the subdivided blocks will be developed and sold.
The remaining block will be held 100% for long term business use.
The cost of the replacement asset has been apportioned for the business use portion.
There was a delay with the land and titles office and the titles for the land were not released within the time specified. This delay caused a delay in settlement.
The delay in settlement has caused the delay in the construction of the replacement asset due to the time frame required to undertake planning and council approvals to commence and start the construction.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 104-190(1A)
Income Tax Assessment Act 1997 Subdivision 152-E
Income Tax Assessment Act 1997 subsection 152-410
Income Tax Assessment Act 1997 subsection 104-190(2)
Reasons for decision
Under section 152-410 of the ITAA 1997, you can choose to obtain a roll over even if you have not yet acquired a replacement asset.
Subsection 104-190(1A) of the ITAA 1997 outlines the replacement asset period for small business roll-overs under subdivision 152-E. The replacement asset period starts one year before the last CGT event and ends 2 years after that CGT event.
You attempted to acquire a replacement asset within the 2-year period, beginning XX June 20XX
The Commissioner has the discretion to extend the replacement asset period as per subsection 104-190(2) of the ITAA 1997.
You signed a purchase contract for the replacement asset to be used partly as your construction business premises and partly for development and resale. The land was expected to settle XXX days after the contract was signed. The land didn't settle until XX months after the contract was signed on XX January 20XX, due to the land and titles office the titles for the land were not released within the expected timeframe.
The delay in settlement of the land caused delay in the construction replacement asset on the business portion of the land.
You have demonstrated that the delay in acquiring the replacement asset was due to the time frame required to undertake planning and council approvals to commence and start construction of the shed.
The costs have been apportioned for the business portion of the land.
The circumstances of the case and explanation for the delay support an extension of the time limit until the XX June 20XX.