Private ruling: Capital gains tax - Extension of time to acquire a replacement asset
Date of advice: 20 May 2020
Published: July 2020
Ruling period: Year ending 30 June 2020 | Year ending 30 June 2021
Date scheme commenced: 1 July 2019

Ruling: Q1: Will the Commissioner exercise his discretion to further extend the replacement asset period under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to 30 June 2021? | A1: Yes. Having considered the relevant facts, the Commissioner will apply his discretion under subsection 104-190(2) of the ITAA 1997 and allow an extension of the time limit to 30 June 2021. The Commissioner notes that COVID-19 pandemic and its effect on small business and the wider economy was the main reason for applying the discretion in this instance. If COVID-19 was not present, then it is unlikely the discretion would have been exercised.

Relevant facts and circumstances: You had operated a business since 2001. In 2015, you entered into an agreement to sell the business and the assets used in the business to an unrelated third party. A capital gain was made on the sale of the business and its assets. You met the eligibility criteria for the small business capital gains tax (CGT) concessions and elected to apply the small business CGT concessions in the 2015-16 income year including the replacement asset rollover. You have had two previous Commissioner's discretions to extend the replacement asset period. You have applied for a further extension of time until 30 June 2021. You have stated that the current conditions caused by the COVID-19 pandemic are unprecedented and have resulted in significant disruption to all industries, including the industries in which you operate. You stated the key reasons why you will not be able to complete acquisitions before 30 June 2020 are the lack of personnel available in all levels of government to provide approval or resolution of ongoing issues and the significant downturn in the relevant industries. You and your affiliate are still in the process of establishing a new business in addition to continuing another business. You state that the COVID-19 pandemic has cause significant stress on operators in the industry and its unlikely you or your affiliate will obtain the necessary approvals in time. In the last discretion application, you and your affiliate were in the process of acquiring a number of sites for business opportunities, You stated in this application that there have been a number of delays in the acquisitions of these sites including Heritage, Planning and Permit issues, and negotiations with landlords falling through. These matters have come to a standstill because of the disruption caused by the pandemic. Further, as these matters are non-essential under the current conditions you do not expect they will be resolved with urgency. You stated you, your affiliates and third parties are not immune to the economic downturn in light of the COVID-19 pandemic. You expect that there will be great difficulty to finalise acquisitions that are currently being pursued, and delays in resolving matters that are presently holding up acquisitions. In furtherance of acquiring a replacement asset, you have pursued a number of sites. You and your affiliate previously pursued a number of other opportunities however they have not proceeded.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 subsection 104-185(1) | Income Tax Assessment Act 1997 subsection 104-190(2)