Private ruling: Capital gains tax
Published: February 2015
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Will the Commissioner exercise his discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow you to choose as a replacement asset, an asset acquired more than two years after the disposal of the asset being replaced? | A1: Yes.

Relevant facts and circumstances: You sold shares in the 2010-11 financial year. You applied the small business rollover concession to the capital gain made on the sale of this asset. Continuing efforts were made to find a replacement asset. You made offers and proposals to purchase various businesses but those offers were rejected. You had entered negotiations to purchase a business however you were unable to reach an agreement with the seller. You eventually purchased shares in the 2013-14 financial year as a replacement asset. You have satisfied the conditions for the small business concessions.

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

Reasons for decision: Summary: Where a taxpayer elects to take advantage of the small business rollover, there are rollover conditions that must be satisfied by the end of the replacement asset period. This period starts one year before and ends two years after the last CGT event that occurs in the income year for which you choose the roll over, or a longer period that the Commissioner allows. You disposed of an asset on in the 2010-11 financial year and did not acquire a replacement asset within two years. The Commissioner may extend the replacement asset period in certain circumstances (subsection 104-190(2) of the ITAA 1997). 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 • a consideration of the consequences. In these circumstances, we consider that you have provided an acceptable explanation for the delay. We do not consider that extending the asset replacement period would unsettle others or that any mischief is involved. Accordingly, the Commissioner will exercise his discretion to allow an extension to the replacement asset period.