Private ruling: Small business capital gains tax concessions
Published: December 2013
Ruling period: Year ended 30 June 2013 | Year ending 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) and allow you further time to purchase a replacement asset? | A1: Yes.

Relevant facts and circumstances: The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are: · the application for private ruling, and · the further information provided. You and your spouse sold an asset and made a capital gain. You and your spouse applied the small business rollover concession to defer the capital gain. You and your spouse began searching for a replacement asset soon after the sale of your original asset and have investigated purchasing a variety of businesses in your local area. They were deemed unsuitable for a variety of reasons including small turnover or purchase price too expensive based on the expected return. You and your spouse made an offer to purchase a business, but it was not accepted. You have also investigated bringing new franchises to your local area, however it was deemed to be an unsuitable location. A natural disaster occurred in the surrounding district which has created economic challenges in your local area.

Relevant legislative provisions: Income Tax Assessment Act 1997 104-185(1) | Income Tax Assessment Act 1997 104-190(2) | Income Tax Assessment Act 1997 Subdivision 152-A

Reasons for decision: Summary: The small business roll-over allows you to defer the capital gain made from a Capital Gains Tax (CGT) event if you acquire one or more replacement assets and satisfy certain conditions. The conditions which must be met to obtain relief are set out in Subdivision 152-A of the ITAA 1997. For you to obtain a roll-over, subsection 104-185(1) of the ITAA 1997 requires you to acquire a replacement asset, and that it be an active asset of yours, within a period starting one year before, and ending two years after the date of disposal of the original asset. Subsection 104-190(2) states that the Commissioner may exercise his discretion to extend those time limits. You disposed of your business and the two year limit in which to find a replacement will consequently expire (before you have purchased a replacement asset). During this period, you have made numerous efforts to secure a replacement business. For a variety of reasons, to date you have been unable to find a suitable replacement asset. In determining if the discretion would be exercised the Commissioner has considered the following factors: · evidence of an acceptable explanation for the period of the extension requested (and whether it would be fair and equitable in the circumstances to provide such an extension) · prejudice to the Commissioner which may result from the additional time being allowed (but the mere absence of prejudice is not enough to justify the granting of an extension) · unsettling of people, other than the Commissioner, or of established practices · fairness to people in like positions and the wider public interest · whether any mischief is involved, and · consequences of the decision. Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 104-190(2) and allow a reasonable extension to the time limit. Allowing an extension is not prejudicial to the Commissioner in this case nor is it unfair to other people in similar positions. The period of extension has a reasonable explanation given the circumstances and an extension will be granted.