Private ruling: Small business roll-over extension of time past the 2 years
Date of advice: 28 May 2018
Published: July 2018
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: March 20XX

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 to December 20XX? | A1: Yes.

Relevant facts and circumstances: You are in a two person partnership with your sibling. In the 20XX financial year you and your sibling elected to use the small business rollover to defer capital gains that you made from the sale of your business. You and your sibling started to look for a replacement asset. Your search was delayed for approximately twelve months due to medical complications. You relied on your sibling for support during this time. You and your sibling continued your search for a replacement asset and found several options, however none of the options were within your price range or matched your business needs. You and your sibling had shortlisted potential small businesses which meet your requirements; however you have experienced a delay in proceeding with purchasing one of these small businesses before the cut-off date. You and your sibling have entered into a contact to purchase a replacement small business.

Relevant legislative provisions: 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. You applied a rollover to a capital gain under the small business rollover during the 20XX financial year. You have been unable to acquire a suitable replacement asset within the replacement period. You have however, considered the purchase of a number of assets. We consider that you have made ongoing efforts to acquire a replacement asset and have entered into a contract. This displays that you have made an effort to acquire a replacement asset as soon as possible. Having considered the relevant factors above, and the particular circumstances of your case, the Commissioner has applied his discretion and will extend the asset replacement period to December 20XX.