Private ruling: Small business concessions
Date of advice: 11 December 2015
Published: February 2016
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2014

Ruling: Q1: Will the Commissioner use his discretion to extend the replacement asset period pursuant to subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of the Small Business capital gains tax (CGT) replacement asset roll-over relief? | A1: Yes.

Relevant facts and circumstances: You disposed of a business and therefore had a CGT event during the 20WW-XX financial year. You elected to defer the capital gain under the small business roll-over concession. Since that time you have investigated several businesses as a possible replacement business. You entered into purchase negotiations with some of those businesses but the deals have fallen through. You are still making concerted efforts to purchase a replacement business and have finance preapproval so you are ready to effect a purchase should a suitable business be found.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 104-190(2) | Income Tax Assessment Act 1997 subdivision 152-A

Reasons for decision: Summary: The small business roll-over allows you to defer the capital gain made from a CGT event if you acquire one or more replacement assets and satisfy certain conditions. The conditions which must be met to obtain relief are set out in Subdivision 152-A of the ITAA 1997. You can choose the roll-over even if you have not yet acquired a replacement asset. However CGT event J5 happens if, by the end of the replacement asset period, you do not acquire a suitable replacement asset which is an active asset. 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 the roll-over provisions. The replacement asset period starts one year before, and ends 2 years after, the last CGT event in the income year for which you obtain the roll-over. Subsection 104-190(2) provides that the Commissioner may extend the replacement asset period. During this period you have made numerous attempts to purchase a new business however the deals have been unsuitable or they have fallen through. For these reasons, to date you have been unable to acquire suitable replacement asset(s). In determining if the discretion would be exercised the Commissioner has considered the following factors: • evidence of an acceptable explanation for the period of the extension requested (and whether it would be fair and equitable in the circumstances to provide such an extension) • prejudice to the Commissioner which may result from the additional time being allowed (but the mere absence of prejudice is not enough to justify the granting of an extension) • unsettling of people, other than the Commissioner, or of established practices • fairness to people in like positions and the wider public interest • whether any mischief is involved, and • consequences of the decision. Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 104-190(2) and allow an extension of time.