Private ruling: Small business replacement asset - CGT roll-over
Date of advice: 19 September 2019
Published: November 2019
Ruling period: 30 June 20XX to 30 June 20XX
Date scheme commenced: 19 December 20XX

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

Relevant facts and circumstances: During the 20XX income year you sold your business and made a capital gain on the sale. You entered into a pre-lodgment review with the ATO in early 20XX in relation to the correct taxation treatment of the CGT event. During the 20XX income year, you received confirmation from the ATO that your proposed position had been accepted in that the basic conditions under Subdivision 152-A of the ITAA 1997 were satisfied and the small business replacement asset roll-over provisions would apply to you. The delay had impeded your ability to acquire a replacement asset as you were waiting for approval that the roll-over was available. A short time after receiving the ATO's confirmation you identified an opportunity to invest in a replacement asset. Unfortunately this proposed transaction fell through due to various legal limitations. You are continuing to explore several investment opportunities but are yet to identify another site for the proposed replacement asset. Even if an appropriate site was located before the close of the current replacement period in the 20XX income year, you will still require an extension to obtain approvals and complete construction before you can begin trading. You are requesting additional time to be able to locate an appropriate asset, undertake the required due diligence prior to purchase, and convert the site into a trading business.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-190

Reasons for decision: Summary: The rules covering the small business roll-over are contained in Subdivision 152-E of the Income Tax Assessment Act 1997 (ITAA 1997). The small business roll-over allows you to defer all or part of a capital gain from a capital gains tax (CGT) event happening to an active asset. CGT event J5 happens if you choose a small business roll-over under Subdivision 152E of the ITAA 1997 and you have not acquired a replacement asset by the end of the replacement asset period. The replacement asset period is the period starting one year before and ending two years after the last CGT event in the income year for which you obtain the roll-over. The replacement asset period may be extended or modified by the Commissioner. In determining whether to allow an extended asset replacement period the Commissioner considers the following factors: You have made attempts to acquire a replacement asset. Allowing an extension is not prejudicial to the Commissioner in this case nor is it unfair to other people in similar positions. There is also no evidence of any mischief involved. Having considered the relevant factors above, and the particular circumstances of your case, the Commissioner will exercise his discretion to extend the replacement asset period to 30 June 20XX.

whether there is evidence of an acceptable explanation for the period of extension requested and whether it would be fair and equitable in the circumstances to provide such an extension | whether there is any prejudice to the Commissioner if the additional time is allowed (however, the mere absence of prejudice is not enough to justify the granting of an extension) | whether there is any unsettling of people, other than the Commissioner, or of established practices | the need to ensure fairness to people in like positions and the wider public interest | whether there is mischief involved, and | the consequences of the decision.