Private ruling: Capital gains tax - small business concessions - Commissioner's discretion
Date of advice: 10 March 2016
Published: May 2016
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2013

Ruling: Q1: Will the Commissioner, exercise discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time to the replacement asset period? | A1: Yes.

Relevant facts and circumstances: You sold an active asset as described under subdivision of 152-A of the ITAA 1997 in the relevant financial year. You applied the small business rollover to the capital gain made by the sale of the asset. The replacement asset was ordered within the replacement asset period and expected to be received in the replacement asset period. The replacement asset was invoiced and delivered shortly after the replacement asset period.

Relevant legislative provisions: Income Tax Assessment Act 1997 subdivision 152-A, | Income Tax Assessment Act 1997 subdivision 152-E, | Income Tax Assessment Act 1997 section 104-190 and | Income Tax Assessment Act 1997 subsection 104-190 (2).

Reasons for decision: Summary: Subdivision 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 relevant financial year. You were expecting to receive a replacement asset within the two year timeframe. However due to circumstances outside your control, the actual replacement asset was not invoiced and received until shortly after the two-year replacement asset period. Having considered the circumstances and the factors outlined above, the Commissioner is able to apply his discretion under subsection 104-190(2)) of the ITAA 1997 and allow an extension of time until the asset was replaced.