Edited version of private advice

Authorisation Number: 1052363942047

Date of advice: 19 February 2025

Ruling

Subject: CGT - small business concessions

Question 1

Will the Commissioner exercise discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the replacement asset period to 10 August 2025 to allow the taxpayer to acquire a replacement asset?

Answer 1

Yes, the Commissioner will exercise their discretion and extend the replacement asset period to 10 August 20XX

This ruling applies for the following period:

Year ending XX June 20XX

The scheme commences on:

X July 20XX

Relevant facts and circumstances

You and your spouse are partners in a partnership.

You and your spouse acquired the property.

The Partnership carried on a primary production business.

The Partnership used the property for their primary production business.

Your spouse passed away.

The settlement of the property was extended.

You were required to leave your place of residence and relocate with three young children.

You had to deal with the estate administration of your spouse which involved your spouse's testamentary trust.

You are still sorting through the process of estate administration.

You continued to operate a primary production business on a separate property during this time. You carried on the business in partnership with your spouse's testamentary trust.

You have inspected several properties in the local area however none have been suitable.

You are not restricting your replacement asset search and have inspected local businesses.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-190

Income Tax Assessment Act 1997 section 152-410

Reasons for decision

Section 152-410 of the ITAA 1997 allows you to choose to obtain a roll over even if you have not yet acquired a replacement asset.

The replacement asset period as outlined in subsection 104-190(1A) of the ITAA 1997 starts one year before the last CGT event and ends 2 years after that CGT event.

The Commissioner has the discretion to extend the replacement asset period under subsection 104-190(2) of the ITAA 1997.

In determining whether to allow a longer period, the Commission will consider a range of factors such as:

•                     Whether there is evidence of an acceptable explanation for the period of extension requested and whether it would be fair and equitable in the circumstances to provide such an extension.

•                     Whether there is 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)

•                     Whether there is any unsettling of people, other than the Commissioner, or of established practices.

•                     The need to ensure fairness to people in like positions and the wider public interest.

•                     Whether there is any mischief involved, and

•                     The consequences of the decision.

Application to your circumstances

You have attempted to acquire a replacement asset within the X-year period.

The unexpected death of your spouse created a significant delay in the commencement of your search for a replacement asset as your emotional and financial capital was used to deal with this situation.

During this time, you also continued to carry on a business.

You have been actively looking for a replacement asset however all the properties you have inspected have been unsuitable.

You are not restricting yourself to another primary production property and have been looking at other local business to purchase as a replacement asset. You are currently looking at purchasing a local business.

The Commissioner considers that you have an acceptable explanation for the period of extensions and that it would be fair and equitable to extend the replacement asset period.

There is no prejudice to the Commissioner if the additional time is allowed and an extension would not cause any unsettling of people.

The extension of time is fair to the wider public interest, there is no mischief involved and no adverse consequences are likely to occur if the extension of time is granted.

The Commissioner will exercise discretion to extend the replacement asset period until XX August 20XX as you have demonstrated that you are actively making attempts to acquire a replacement asset within the X-year period given your circumstances and the explanation for the delay supports an extension of time.