Private ruling: CGT - extension of time
Date of advice: 16 July 2024
Published: 26 August 2024
Ruling period: X of XX 20XX to X of XX 20XX
Date scheme commenced: X of XX 20XX

Ruling: Q1: Will the Commissioner grant the taxpayer an extension to the replacement asset period of 12 months under subsection 104-190(2) of the ITAA 1997? | A1: Yes. The taxpayer has not been able to make the fourth element expenditure to contribute to the small business roll-over relief. This was caused due to circumstances outside of their control. Because of this, the Commissioner grants an extension to the replacement asset period of 12 months.

Relevant facts and circumstances: The taxpayer entered into a contract to sell an asset on X of XX 20XX. The effective date of the transfer of the asset was X of XX 20XX. The asset was owned and operated by the taxpayer since 19XX The taxpayer chose to utilise the small business CGT roll-over concession. The rollover period ended, and the taxpayer has not made the fourth element expenditure to qualify for the CGT relief. The intended fourth element expenditure included making improvements to another active asset that the taxpayer owns and uses in the course of carrying out a business. The taxpayer was unable to make the fourth element expenditure within the 2-year replacement asset period because a major natural disaster that occurred in their region has caused a shortage of materials and workers to complete the works. Additionally, throughout the replacement asset period, both of the directors were unavailable due to medical reasons.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-190 | Income Tax Assessment Act 1997 subdivision 152-E

Reasons for decision: Summary: Under subdivision 152-E of the ITAA 1997, a small business can apply a roll-over and defer the making of a capital gain from a CGT event happening in relation to one or more small business assets. Under subsection 104-190 (1A) of the ITAA 1997 If you choose a small business roll-over under subdivision 152-E of the ITAA 1997, the replacement asset period is the period: a) Starting one year before the last CGT event in the income year for which you obtain the rollover; and b) Ending 2 years after that last CGT event. The replacement asset period may be extended at the discretion of the Commissioner under subsection 104-190(2) of the ITAA 1997. The due date for the replacement asset period has passed. The taxpayer has been unable to make any expenditure that would go towards your fourth element cost base to count towards the CGT asset rollover for the following reasons: Natural disaster resulting in a material and worker shortage. Both directors being unavailable due to medical reasons. Because of this, the Commissioner will grant you an extension of time to the replacement asset period.