Private ruling: CGT - replacement asset rollover relief - extension of time
Date of advice: 13 June 2023
Published: 31 July 2023
Ruling period: Year ending 30 June 2023
Date scheme commenced: 1 July 2022

Ruling: Q1: Will the Commissioner exercise the discretion in subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the replacement asset period to acquire a replacement asset by 12 months? | A1: Yes. Having considered your circumstances and the relevant factors, the Commissioner considers it appropriate to grant an extension of the replacement asset period by 12 months.

Relevant facts and circumstances: The Family Trust sold the Business the taxpayer carried on, in the financial year ending 2020. The Family Trust applied the capital gains tax (CGT) small business roll-over in Subdiviion 152-E to gain from the sale. The Family Trust actively searched for a replacement asset by contacting numerous business brokers both prior to settling on the sale and following the sale. In the financial year 2020, the Family Trust initiated correspondence with a Business. The taxpayer signed a non-disclosure agreement and evaluated their financial position. However, due to the developing COVID-19 situation made the business non-operational, so the negotiations did not proceed. In financial year 2020, the Family Trust commenced discussions to purchase shares in a Company. Serious illness of the vendor of the shares delayed the purchase negotiations until financial year 2022. The Family Trust agreed in principle to the terms of the purchase of the shares in the Company. However, further delays ensued in drawing up the share sale agreement with the vendor's ongoing health issues contributing to the time taken. The share sale agreement was signed financial year 2023. During the period of delay in purchasing the Company shares the Family Trust continued to investigate alternative business opportunities. The Family Trust enquired into the purchase of a Business in the financial year 2021 where the taxpayer also signed a non-disclosure agreement and assessed their financial position. However, negotiations fell through due to a breakdown in communications and withdrawal by the owners. From June 2021 to the beginning of 2022, stringent COVID-19 lockdowns and regulations impeded further searches by the you into other businesses. The shares acquired are active assets. An individual is connected with the Family Trust, has a small business participation percentage of at least 90% and is a CGT stakeholder in the Company. The requirements in paragraphs 104-198(1)(b) and (c) of the ITAA 1997 have been met.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-190 | Income Tax Assessment Act 1997 subsection 104-190(2) | Income Tax Assessment Act 1997 section 104-198 | Income Tax Assessment Act 1997 Subdivision 152-E