Private ruling: Capital gains tax
Date of advice: 11 August 2020
Published: September 2020
Ruling period: Year ending 30 June 2021 | Year ending 30 June 2022
Date scheme commenced: 1 July 2017

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 to xxxx? | A1: Yes. After reviewing your specific circumstances and the relevant factors, the Commissioner will exercise the discretion under subsection 104-190(2) of the ITAA 1997 to allow an extension of the replacement asset period.


Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 152-E | Income Tax Assessment Act 1997 section 103-25 | Income Tax Assessment Act 1997 section 104-190


Relevant facts: Entity A owned a business in a partnership with another entity. Each entity was an equal partner in the business. | The partnership commenced several years ago. | The business entered into a contract for sale as at xxxx and the partnership assets were subsequently sold. | A review of prospective businesses commenced soon after the sale and has been ongoing. | On xxxx entity A wrote to the Australian Taxation Office (ATO) to assess the market value of the partnership enterprise for the purposes of calculating the net value of the CGT assets and to confirm that they satisfied the maximum net asset value test and were eligible for the small business capital gains tax (CGT) concessions. This private ruling issued xxxx. The | valuation report was undertaken and the market value for the partnership enterprise was approximately $xxx. | Entity A satisfies the basic conditions and other requirements for the small business rollover. | Entity A lodged the income tax return for year ended 30 June 20XX, electing to use the small business rollover in respect of the capital gain event. | Following this, entity A sought a further private ruling from the ATO requesting the Commissioner to exercise their discretion under subsection 104-190(2) of the ITAA 1997 to extend the replacement asset period to xxxx. This request was granted. | Many investigations into possible business to purchase were carried out. | In xxxx entity A signed a contract to purchase a business. This transaction settled, for approximately $xxx, however, has only partly expended the required rollover amount. | Entity A has undertaken an extensive search to identify further suitable replacement assets. | Entity A is looking for complementary investments connected to the business. The business is currently operating. | Entity A has developed a network of contacts including business brokers, and other professionals who have become aware entity A is looking at opportunities. Products are typically sources from overseas and in the current environment this has meant an extraordinary amount of increased uncertainty. | The current COVID-19 pandemic is also causing uncertainty. The uncertainty includes the access to supply and consumer spending patterns. In the xxxx lockdowns, there was disruption in staffing. There have been supply chain disruption and uncertainty for products sourced overseas which means not being able to source products in a timely manner or at all. The inability to travel freely to manufacturing countries to identify and source suitable products for inputs into the business has also occurred.