Private ruling: Capital gains tax - extension of time to acquire a replacement asset
Date of advice: 21 June 2019
Published: August 2019
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise his discretion to further extend the replacement asset period under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 104-190(2) and allow an extension of the time.

Relevant facts and circumstances: Entity A operates a business. Entity A commenced its business operation in the early 2000s. Entity A sold its business and its assets a few years ago. Entity A met the eligibility criteria for the small business capital gains tax (CGT) concessions. Entity A elected to apply small business CGT concessions in the 2015-16 income year including the replacement asset roll-over. A capital gain was made on the sale of the business and its assets. Entity A is seeking to diversify its business by purchasing a commercial property from which Entity A, or an entity that is connected or affiliated with Entity A, will operate a certain type of business. Due to the nature of this proposed new venture, it is taking some time for the Entity A to find a suitable location for the business and obtain the necessary approvals. Entity B is an entity connected with Entity A and acting as agent of Entity A has undertaken negotiations with respect to Entity A obtaining the whole of, or an interest in, leaseholds associated with several properties as a potential replacement asset. Due to circumstances outside of the Entity A's control it was not able to acquire an appropriate replacement asset within the allowed period but continues to pursue suitable replacements. Significant details have been provided of the ongoing negotiations and contracts in relation to acquiring replacement assets. There have been a number of issues encountered including, opposition from the state heritage authority and neighbouring objectors.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Subsection 104-185(1) | Income Tax Assessment Act 1997 Subsection 104-190(2)