Private ruling: Extension of time to acquire a replacement asset
Published: July 2017
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20YY | Year ending 30 June 20ZZ
Date scheme commenced: 1 July 20WW

Ruling: Q1: Will the Commissioner extend the replacement asset period to 30 June 20ZZ? | A1: Yes.

Relevant facts and circumstances: 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). You have been in constant discussions and negotiations to purchase a suitable replacement asset; however, there have been issues with the acquisition of the replacement asset that have been outside of your control. These issues mean that you will not acquire the replacement asset until the 20ZZ income year which will be outside the two year replacement asset period. You request an extension of time to 30 June 20ZZ to acquire a replacement asset.

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 made from a capital gains tax (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 104-198(4) 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 any mischief involved, and ● the consequences of the decision. Having considered the relevant factors above, and the particular circumstances of your case, the Commissioner has applied his discretion and will extend the replacement asset period to 30 June 20ZZ.