Private ruling: CGT - small business concessions - replacement asset period
Date of advice: 23 June 2015
Published: June 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

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 to allow you to apply the capital gains tax (CGT) small business rollover concessions? | A1: Yes

Relevant facts and circumstances: You operate a business. You entered into a contract to purchase land (new land) in 20XX. Special conditions in the contract allowed for a deferred settlement in 20XX. At the same time, you entered into a lease arrangement on the new land with the vendor for the term of dd/mm/20XX to dd/mm/20XX. To finance the purchase of the new land, you need to sell an existing property (existing property). The existing property was placed on the market prior to the purchase of the new land. You signed an Exclusive Auction Authority with a real estate agent in 20XX and an auction was scheduled for 20XX. The existing property did not sell at auction and subsequent efforts to sell the existing property did not result in a signed contract for sale until 20XX. Settlement occurred in 20XX. You state that the delay in sale of the existing property was impacted by factors which were outside your control, such as difficult business conditions limited the number of potential buyers and their access to finance. You state that you meet the conditions to be eligible to apply the small business CGT concession.

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

Reasons for decision: Summary: In order to apply the small business rollover, a replacement asset must be acquired by the end of the period starting one year before, and ending two years after the relevant CGT event, the replacement asset period. 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 your case, you acquired a replacement asset, the new land, prior to disposing of the original asset, the existing property. There were delays in the disposal of the existing property which were beyond your control. A contract for sale of the existing property was signed in 20XX; however the replacement asset was acquired in 20XX, outside the replacement asset period. Having considered the relevant factors above, and the particular circumstances of your case, the Commissioner has applied his discretion and will extend the asset replacement period to allow you to apply the CGT small business rollover concessions.