Private ruling: CGT small business concessions - extension of time for replacement asset
Date of advice: 24 June 2022
Published: October 2022
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise the 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 roll-over under Subdivision 152-E of the ITAA 1997? | A1: Yes. Having considered the taxpayer's circumstances and the relevant factors, the Commissioner considers it appropriate to grant an extension of the replacement asset period to 30 June 20XX.

Relevant facts and circumstances: The taxpayer entered into a contract to sell a business. The contract contained terms for an Earn Out Arrangement (the Arrangement) by the parties. It also included an employment arrangement with the key executive of the taxpayer in order to manage the transition of ownership. The Arrangement was based on periods in the financial years ending 30 June 20XX and 30 June 20XX. The Arrangement also included a restraint clause prohibiting the taxpayer and key executive to participate in any business activity in competition with the sold business for a period of one year after the employment arrangement ends. The industry that the taxpayer was in is the area of expertise of the taxpayer. They would like to obtain a replacement asset within this industry. The current economic climate due to COVID-19 has made identifying a suitable opportunity for reinvestment troublesome due to a downturn in the industry in which the taxpayer specialises in. This issue has further contributed to the delay in identifying and buying a suitable replacement asset. The CGT event met the requirements for the CGT small business concessions as outlined in Subdivision 152-A of the ITAA 1997.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 104-90(2)