Private ruling: CGT – small business concessions – roll-over – replacement asset period
Date of advice: 27 March 2018
Published: June 2018
Ruling period: Year ending 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Will the Commissioner extend the replacement asset period to DD/MM/YYYY? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 paragraph 104-185(1)(a) | Income Tax Assessment Act 1997 subsection 104-190(2) | Income Tax Assessment Act 1997 subsection 104-197(1) | Income Tax Assessment Act 1997 subsection 104-197(5) | Income Tax Assessment Act 1997 subsection 104-198(1) | Income Tax Assessment Act 1997 subsection 104-198(4) | Income Tax Assessment Act 1997 Subdivision 152-E

Reasons for decision: Summary: The rules covering the small business roll-over are contained in Subdivision 152-E of the Income Tax Assessment Act 1997 (ITAA 1997). The small business roll-over allows you to defer all or part of a capital gain from a CGT event happening to an active asset. CGT event J5 happens if you choose a small business roll-over under Subdivision 152-E and you have not acquired a replacement asset by the end of the replacement asset period (subsection 104-197(1) of the ITAA 1997). CGT event J6 happens if, by the end of the replacement asset period, the cost base (first, second and fourth elements only) of the replacement asset(s) you acquired is less than the capital gains disregarded under Subdivision 152-E (subsection 104-198(1) of the ITAA 1997). The replacement asset period is the period starting one year before and ending two years after the last CGT event in the income year for which you obtain the roll-over (paragraph 104-185(1)(a) of the ITAA 1997). The replacement asset period may be extended or modified by the Commissioner (subsections 104-197(5) and 104-190(2) of the ITAA 1997). In determining whether to allow an extended asset replacement period the Commissioner considers the following factors: ● whether there is evidence of an acceptable explanation for the period of extension requested and whether it would be fair and equitable in the circumstances to provide such an extension ● whether there is any prejudice to the Commissioner if the additional time is allowed (however, the mere absence of prejudice is not enough to justify the granting of an extension) ● whether there is any unsettling of people, other than the Commissioner, or of established practices ● the need to ensure fairness to people in like positions and the wider public interest ● whether there is mischief involved, and ● the consequences of the decision. Having considered the relevant factors above, and the particular circumstances of your case, the Commissioner will apply the discretion and extend the replacement asset period to DD/MM/YYYY.

Relevant facts: You sold an active asset. | You applied the small business roll-over to the capital gain made on the sale of the active asset (after applying the small business active asset reduction). | Due to issues outside your control you have been unable to acquire a replacement active asset within the replacement asset period. | You are currently in the process of setting up your new business and purchasing an active asset. | You have requested an extension of time to acquire an active asset by DD/MM/YYYY.