Private ruling: CGT - Rollover - extension of replacement asset period
Date of advice: 7 June 2016
Published: July 2016
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2015

Ruling: Q1: Will the Commissioner exercise the discretion to extend the replacement asset period to 30 June 2017? | A1: Yes.

Relevant facts and circumstances: You sold an asset in the 20XX-XX financial year and made a capital gain. In the 20XX-XX financial year, you elected to apply the small business roll-over to the capital gain. You entered into negotiations in the 20YY-YY financial year to purchase a replacement asset. You and Entity A agreed in principle for you to acquire the assets in the 20ZZ-ZZ financial year. The assets are subject to construction activities which were expected to be finalised in the 20ZZ-ZZ financial year. Construction has been delayed and is expected to be completed in the 20XY-XY financial year. This ruling has been prepared on the basis that you satisfied the basic conditions to access the small business capital gains tax (CGT) conditions including the active asset test.

Relevant legislative provisions: Income Tax Assessment Act 1997 paragraph 104-185(1)(a) | Income Tax Assessment Act 1997 subsection 104-190(2) | Income Tax Assessment Act 1997 subsection 104-197(1) | Income Tax Assessment Act 1997 subsection 104-197(5) | Income Tax Assessment Act 1997 Subdivision 152-E

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 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 (subsection 104-197(1) of ITAA 1997). 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 (paragraph 104-185(1)(a) of the ITAA 1997). The replacement asset period may be extended or modified by the Commissioner (subsections 104-197(5) and 104-190(20 of the ITAA 1997). In determining whether to allow an extended asset replacement period the Commissioner considers the following factors: • 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. Having considered the relevant factors above, and the particular circumstances of your case, the Commissioner has applied the discretion and will extent the replacement asset period to 30 June 2017.