Private ruling: Small business capital gains tax concessions - replacement asset period
Date of advice: 17 December 2020
Published: February 2021
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20YY | Year ended 30 June 20ZZ | Year ended 30 June 20AA | Year ended 30 June 20BB
Date scheme commenced: X XX 20WW

Ruling: Q1: Will the Commissioner exercise his direction under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the replacement asset period to 30 June 202X? | A1: Yes. Having considered the relevant factors, and the particular circumstances of your case, the Commissioner has applied his discretion and will extend the asset replacement period to 30 June 202X. Further information can be found by searching 'QC 52291' on ato.gov.au

Relevant facts and circumstances: The taxpayer in question had a CGT event A1 during the 20XX financial year in relation to a sale of shares in a company (referred to as Co A from hereon) that was carrying on an active business. The contract for sale was executed on the X XX 20WW. Under the contract the taxpayer had disposed 100% of shares it held in the Co A for $A00,000. Based on agreements made between the parties $B00,000 of the capital proceeds were paid to the taxpayer upon execution of this contract. The remaining $C00,000 was to be paid to the taxpayer at a such time when Co A was able to enter into certain commercial contracts with 3rd parties and was able to raise further capital to produce and commercialize a new product. Further to this when completing the 20XX income tax return certain small business CGT concessions were applied, including the small business rollover relief under Subdivision 152E. The taxpayer had a minimal tax cost base for the shares it held in Co A, as such ~$C0,000 of capital gains were deferred under Subdivision 152 E after applying certain other small business CGT concessions. At the time of completing the 20XX income tax return the intention of the taxpayer was to purchase a replacement asset within the relevant time frames for the amount ~$C0,000.

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