Private ruling: Capital gains tax
Date of advice: 7 December 2016
Published: May 2017
Ruling period: Year ending 30 June 20YY | Year ending 30 June 20ZZ
Date scheme commenced: 1 July 20XX


Relevant facts and circumstances: The company is a small business carrying on a business. In 20WW the company sold their interest in Company 2, making a capital gain. In 20WW the company sold their interest in Company 3, making a capital gain. In the 20WW income tax return the company applied the small business active asset discount to the capital gains. To the remaining capital gain the company applied the replacement asset rollover provision. The company has not acquired a replacement asset within the requisite two year period for either of the Capital gain events. Prior to the sale of the interests in Company 1 and Company 2, there were disagreements between the internal business partners, resulting in the sale of various businesses. There were extended negotiations and disputes with business partners involved. For a period of time the director of the company moved overseas for personal reasons, due to the ill health of a family member.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 104-190(2) | Income Tax Assessment Act 1997 Section 104-197 | Income Tax Assessment Act 1997 Subdivision 152-A

Reasons for decision: Summary: The small business rollover allows you to defer the capital gain made from a Capital Gains Tax (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 Income Tax Assessment Act 1997 (ITAA 1997). For you to obtain a rollover, subsection 104-185(1) of the ITAA 1997 requires you to acquire a replacement asset within a period starting one year before, and ending two years after the date of disposal of the original asset. Subsection 104-190(2) of the ITAA 1997 states that the Commissioner may exercise his discretion to extend those time limits. The relevant factors in determining whether to extend the replacement asset period are: ● there should be evidence of an acceptable explanation for the period of extension requested and that it would be fair and equitable in the circumstances to provide such an extension ● account must be had to any prejudice to the Commissioner which may result from the additional time being allowed, however, the mere absence of prejudice is not enough to justify the granting of an extension ● account must be had of any unsettling of people, other than the Commissioner, or of established practices ● there must be a consideration of fairness to people in like positions and the wider public interest ● whether there is any mischief involved, and ● a consideration of the consequences. Application to your circumstances In this case, the temporary relocation overseas of the company's director due to personal reasons, along with the extended disputes and negotiations with the business partnerships has affected the ability to purchase a replacement asset. Having considered the relevant facts, the extension of time that you are requesting is not unreasonable. The Commissioner is able to apply discretion under subsection 104-190(2) of the ITAA 1997 and allow a reasonable extension to the time limit. In view of this, the time limit that would require the replacement asset to be purchased no later than two years after the sale of the active asset will be extended to 30 June 20ZZ.