Private ruling: Capital gains small business concessions
Published: July 2012
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012
Date scheme commenced: 1 July 2009

Ruling: Q1: Will the Commissioner exercise his discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the replacement asset period? | A1: No.

Relevant facts and circumstances: You sold the goodwill of your business in the 2009-10 income year due to family reasons. You elected to take up the CGT small business rollover. Due to family reasons, you have not acquired a replacement asset within the 2 year CGT replacement period. You have requested an extension of time to the replacement period of 18 months.

Relevant legislative provisions: Income Tax Assessment Act 1997 paragraph 104-185(1)(a) | Income Tax Assessment Act 1997 subsection 104-190(2)

Reasons for decision: Summary: In order to apply the small business rollover, a replacement asset must be acquired within two years after the relevant CGT event. However the Commissioner may extend the replacement asset period in certain circumstances (subsection 104-190(2) of the ITAA 1997). The relevant factors in determining whether to extend the replacement asset period are: · 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 which may result from the additional time being allowed, however the mere absence of prejudice is not enough to justify the granting of an extension · account must be had of any unsettling of people, other than the Commissioner, or of established practices · there must be a consideration of fairness to people in like positions and the wider public interest · whether there is any mischief involved · a consideration of the consequences. | Detailed Reasoning - Application to your circumstances: You disposed of the goodwill in the 2009-10 income year. You were required to acquire a replacement asset within two years of the disposal date. In considering whether to exercise his discretion, the Commissioner needs to be satisfied that there were circumstances beyond your control that prevented you from finding a replacement asset within two years. You stated that the delay in purchasing a replacement asset was due to family commitments. This alone is not considered to be an acceptable explanation for the delay. After considering both the relevant factors for determining whether to exercise the Commissioner's discretion and the specific circumstances of this case, we consider that your circumstances do not warrant an extension of time. This is for the following reasons: · In your case it is difficult to say there is evidence of an acceptable explanation for the period of extension requested. The reasoning for the delay is purely a personal and private decision with regards to your family and you have not provided any circumstances beyond your control that prevented you from acquiring a replacement asset. You have not provided any documented attempts to acquire a replacement asset since the CGT event occurred. · To allow an extension of time in your case is likely to unsettle people for the reasons discussed above, that is, lack of evidence of an acceptable explanation. · While there is no suggestion of mischief in this case, it could not be considered fair to people in like positions to allow you an extension of time. Another application with similar circumstances would be denied. · To allow an extension of time of 18 months effectively allows a deferral of the capital gain for three and a half years. Such an extension of time is well in excess of usual practice without evidence of an acceptable explanation. Therefore, the Commissioner will not exercise the discretion under subsection 104-190(2) of the ITAA 1997 to extend the period for acquiring the replacement asset.

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