Private ruling: CGT - Small business concession - extension of time for a replacement asset
Published: July 2014
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

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? | A1: Yes, to dd/mm/yyyy.

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. You operate a business from neighbouring premises. One of the premises was very old and in need of repair. You obtained permits to develop the entire site. After fully costing the project, you decided you did not have sufficient experience or resources to undertake the project. You then sold the premises with the permits to a developer with the agreement that you would purchase the new business premises back on completion of the project. You signed a sale contract with the developer. You accessed the small business CGT concession, in the year of the disposal, to rollover the capital gain into the new asset, the new replacement business premises. Several issues delayed the construction of the property: • Council conditions were disputed. • Settlement on the sale to the developer was delayed. • A dispute with the electricity provider. • Disputes with an adjoining neighbour who would not allow access for certain works. • It is a complicated building project due to the fact there has been a demolition and a total rebuild of the old structure that is taking time to complete. • The project has been delayed by local resident and business objections to the development. • The site involves an area allocated to Owners Corporation which has also cost time. • During construction the surrounding businesses need to keep operating uninterrupted by the builders. All of these issues have caused the project to be delayed which has extended the expected completion date of the project. At this stage, there is now an estimated completion date, but there is no guarantee that it will be completed by this time.

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

Reasons for decision: Summary: Where a taxpayer elects to take advantage of the small business rollover, there are rollover conditions that must be satisfied by the end of the replacement asset period. This period starts one year before and ends two years after the last CGT event that occurs in the income year for which you choose the rollover. However the Commissioner may extend the replacement asset period in certain circumstances (subsection 104-190(2) of the Income Tax Assessment Act 199 7). 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. You rolled over a capital gain under the small business rollover for a CGT event that occurred. You have verbally agreed to purchase a newly constructed replacement business premises. However due to construction delays the premises will not be ready in the required time frame. 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 dd/mm/yyyy.