Private ruling: CGT - SBC - Extension to replacement asset period
Published: August 2014
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 2012

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: Yes

Relevant facts and circumstances: The company and the trust finalised the sale of business interests and assets to an unrelated party (the CGT event). The company and trust applied the small business concessions, including the replacement asset rollover, to the capital gains that arose from the CGT event. The ATO commenced a review in relation to the CGT event. As a part of the review, the ATO were reviewing the correct date that the CGT event was taken to have occurred and the allocation of the sales proceeds between the various 'vendor' entities. The ATO review was finalised and you were advised that no further action would be taken, but concluding that the CGT event occurred during the 2012-13 financial year and that the relevant returns should be amended to reflect this. During the period that the ATO was conducting the review, the company and trust were unable to properly explore their options for the acquisition of replacement assets as both the date applicable and the amount eligible for the rollover were uncertain.

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

Reasons for decision: Summary: Where a taxpayer elects to take advantage of the small business rollover, there are rollover conditions that must be satisfied by the end of the replacement asset period. This period starts one year before and ends two years after the last CGT event that occurs in the income year for which you choose the rollover. 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. In this case, the company and trust disposed of business interests and assets and made a capital gain. The small business rollover was chosen to defer a portion of that capital gain. Due to a review conducted by the ATO there was uncertainty as to the timing of the CGT event and the amount available for rollover for some time. Having considered the relevant factors above, and the particular circumstances of this case, the Commissioner has applied his discretion and will extend the asset replacement period.