Private ruling: CGT small business active asset rollover concession
Published: September 2014
Ruling period: Year ended 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 2013

Ruling: Q1: Will the Commissioner exercise his discretion under section 104-190(2) of the In come Tax Assessment Act 1997 (ITAA 1997) to extend the time limit under subsection 104-185(1) of the ITAA 1997 for the replacement asset to be acquired to 31 July 2014? | A1: Yes

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. The company entered into a contract to sell a CGT small business active asset on dd/mm/yyyy and settlement was effected on dd/mm/yyyy. A gross capital gain was realised by the company in the relevant financial year as a result of the sale. The company has satisfied the basic conditions to qualify for the Small Business Entity concessions. The company is a small business entity and satisfies the $6 million net asset test. The company was carrying on a business of leasing out the commercial land and building following a period of use of the building in the company's business. The commercial land and building was active at the time the contracts were signed and when settlement was effected. The company applied the 50% Small Business Active Assets Reduction, reducing the capital gain. The Small Business Rollover Exemption was then applied. The capital gain was reported in the company's relevant income tax return. During the two year period following the sale of the asset, the company actively searched for a replacement asset. It researched available assets, conducted several inspections, and had regular contact with various selling agents during this time. The company considered a number of different assets over this period. The company purchased the replacement active asset. The process to purchase the asset took a considerable amount of time from start to finish.

Relevant legislative provisions: Income Tax Assessment Act 1997 (ITAA 1997) section 104-190 | Income Tax Assessment Act 1997 (ITAA 1997) section 104-185

Reasons for decision: Summary: The small business rollover 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 rollover, subsection 104-185(1) of the ITAA 1997 requires you to acquire a replacement asset within a period starting one year before, and ending two years after the date of disposal of the original asset. Subsection 104-190(2) of the ITAA 1997 states that the Commissioner may exercise his discretion to extend those time limits. In determining if the discretion would be exercised the Commissioner has considered the following factors: • 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 • consideration of the consequences. These factors as they relate to you are discussed below. Your search for a suitable replacement active asset commenced shortly after the settlement of the sale of your existing active asset. Having considered over 18 different assets, you submitted interest several expressions of interests in different assets, however at various stages and reasons no further progress was made. The asset which you eventually purchased took considerable time to research, compete in tenders and finally settle, from when the asset was listed for sale the second time in mm/yyyy, to the eventual settlement in mm/yyyy. This length was due to the vendor (receiver and bank) taking lengthy periods of time to respond to queries and come to decisions. Having considered the relevant facts, you appear to have made a genuine attempt to comply with the requirements on subsection 104-185(1). The extension of time that you are requesting is not unreasonable, given your circumstances. Accordingly, the Commissioner is able to apply his discretion under subsection 104-190(2) and allow a reasonable extension to the time limit. In view of this, the time limit that would require the replacement asset to be purchased no later than two years after the sale of the active asset will be extended to 31 July 2014, when you purchased the replacement business, in accordance with your request.