Private ruling: Rollover - replacement asset
Date of advice: 24 August 2015
Published: August 2015
Ruling period: Year ended 30 June 20ZZ
Date scheme commenced: 1 July 20YY

Ruling: Q1: 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 30 June 20ZZ? | A1: Yes.

Relevant facts and circumstances: In the 20WW-XX financial year you elected to use the small business rollover to defer capital gains that you made. The date of the capital gains tax (CGT) event that was rolled over was late May 20XX. One month after the CGT event, the spouse of your director was admitted to hospital. Since then the spouse has spent time in and out of hospital. When not in hospital the spouse has required full-time care which has been provided by the director. As their spouse's health has improved, the director has commenced searching for a replacement asset.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 104-190(2) Income Tax Assessment Act 1997 Division 152-E

Reasons for decision: Summary: Division 152-E of the Income Tax Assessment Act 1997 (ITAA 1997) allows a small business to 'rollover', that is to defer, all or part of a capital gain made from a capital gains tax (CGT) event happening to an active asset. A condition of choosing the rollover is that you must replace the active asset or incurred expenditure on a capital improvement to an existing asset by the end of the replacement asset period. This period starts one year before and ends 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, and • a consideration of the consequences. You rolled over capital gains under the small business rollover during the 20WW-XX financial year. Due to the ill-health of the spouse of your director, you have been unable to acquire a suitable replacement asset within the replacement asset period. Your director commenced searching for a replacement asset as their spouse's condition improved. 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 test to 30 June 2016.