Private ruling: Capital gains tax - small business concession
Date of advice: 28 June 2018
Published: September 2018
Ruling period: 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Will the Commissioner exercise the discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time to acquire a replacement asset? | A1: Yes Having considered your circumstances and the acceptable explanation provided, the Commissioner considers it would be fair and equitable to apply his discretion under subsection 104-190(2) of the ITAA 1997 and allow an extension of time. The extension will allow the new asset to be considered a replacement asset for the purposes of section 104-185 of the ITAA 1997. Allowing an extension is not prejudicial to the Commissioner in this case nor is it unfair to other people in similar positions. Further information on the small business rollover can be found on our website ato.gov.au and entering Quick Code QC52291 into the search bar at the top right of the page.

Relevant facts and circumstances: You sold a franchise business in 20XX and made a capital gain. You satisfy the basic conditions for the small business CGT concessions. In the income tax period applicable, you elected to utilise the small business CGT rollover concession. Under this concession you are required to acquire a replacement asset within the two years, and you commenced this process in 20XX. You intended to operate this new franchise business in a prime location within a shopping centre that was being extended. This new extension was to be completed in 20XX. This did not eventuate as the landlord of this new construction delayed the build by negotiating with a new tenant, extending the completion date to 20XX. This negotiation was outside of your control and you ceased this business opportunity in 20XX. You immediately commenced looking for another business opportunity and in 20XX this was secured by way of another franchise business. You paid an initial deposit; did all required training and purchased new products for this franchise. This franchise is located in another state and will be the first of its kind in this area. You also relocated your family to this state. Initially you anticipated opening this new franchise in the months of 20XX as you had taken steps leading up to this time in negotiating a new lease in a shopping centre complex. A copy of the terms of lease was sent to you and unfortunately the gross rent conditions changed increasing the total rent outgoings in excess of 50%, making the offer unrealistic for your business model. In 20XX you were approached by a real estate agent who you have had previous contact with and offered you an available site that had come back on the market that is now completely vacant, enabling you to consider this location for your fitout. You are currently in the process of finalising the terms and conditions of this lease and anticipate the fitout and commencement of your new franchise will be opened for business by 20XX.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-190.