Private ruling: CGT - Small business concessions
Published: May 2012
Ruling period: Year ending 30 June 2011
Date scheme commenced: 1 July 2010

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 by two years? Answer No.

Relevant facts and circumstances: You operated a business for a number of years. You sold some land in the 2009-10 income year which resulted in a capital gain. You satisfied all of the requirements to elect the small business rollover in relation to the sale of the land. You elected to roll the capital gain over into replacement assets. There was a considerable amount of time between the contract and settlement on the land and for you to relocate to a new premises and sell the remaining business equipment. This has contributed to the delay in you purchasing a replacement asset. You have been investigating possible business opportunities. However, since the sale of the farming land, you have not seriously considered or made any offers on any specific replacement assets. You anticipate that you will acquire a replacement asset within the next two years. You have requested an extension of the replacement asset period for a further two years.

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 Income Tax Assessment Act 199 7). 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 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 land in 2010. 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 partly due to the length of time that it took you to sell the remaining equipment and relocate to a new residence . 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. Although you have indicated that you have investigated possible business opportunities, there have been no 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 two years to effectively allow a four year deferral of the capital gain. Such an extension of time is well in excess of usual practice without evidence of an acceptable explanation. Therefore, the Commissioner will not extend the period for acquiring the replacement asset.

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