Private ruling: Capital gains tax
Date of advice: 16 August 2016
Published: September 2016
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2014

Ruling: Q1: Pursuant to section 104-190 of the Income Tax Assessment Act 1997 will the commissioner exercise his discretion in granting an extension to the replacement asset period for a CGT rollover applied in the 20XX year to include items purchased outside the two year period? | A1: Yes.

Relevant facts and circumstances: In 20XX you sold your business and applied the capital gains tax (CGT) rollover exemption to defer your capital gain. Within a few months of the sale of your business you established a new business. The new business requires an accreditation issued from a government agency. You applied for this accreditation and it was received in 20XX, initial assets for the business were purchased at this time. In 20XX you began negotiations to purchase a local business to expand your business; however no agreement was made until a particular month 20XX. To operate the business an additional accreditation was required; this was not received until a particular month in 20XX, at this time you also made the final payment to acquire the business. It was also at this point in time that you realised that the asset you were going to use for the expansion of your business was not suitable as it did not meet the required safety standards. You have spent the remaining time searching for a suitable asset. The safety requirements to operate this new business are extensive which has caused you a considerable delay in finding the right asset. You have found an appropriate asset for purchase; however you have not purchased the asset as you are waiting for the outcome of this private ruling. You advised that you can purchase the asset within a week of the private ruling being issued. You advised that you also needed to purchase an additional asset to use in conjunction with the other asset purchase. You have delayed the purchase of this additional asset pending on the outcome of this private ruling. You advised that you would be able to obtain this asset by a particular month in 2016.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-190 | Income Tax Assessment Act 1997 Subsection 104-185(1)

Reasons for decision: Summary: The small business roll-over allows you to defer the capital gain made from a capital gains tax (CGT) event if you acquire one or more replacement assets and satisfy certain conditions. For you to obtain a roll-over, subsection 104-185(1) requires you to acquire a replacement asset within a period starting one year before, and ending two years after the date of the disposal of the original asset. Subsection 104-190(2) states that the Commissioner may exercise his discretion to extend those time limits. In determining if the discretion would be exercised the Commissioner has considered the following factors: • there should be evidence of an acceptable explanation for the period of extension requested and that it would be fair and equitable in the circumstances to provide such an extension • account must be had of any prejudice to the Commissioner which may result from the additional time being allowed, however the mere absence of prejudice is not enough to justify the granting of an extension • account must be had of any unsettling of people, other than the Commissioner, or of established practices • there must be a consideration of fairness to people in like positions and the wider public interest • whether there is any mischief involved, and • a consideration of the consequences. Application to your circumstances We consider that the delay in receiving the correct accreditation required, to operate, your business and the difficulty in find an appropriate asset is an acceptable explanation as to the need for an extension of time to purchase the asset. Having considered the relevant factors, the Commissioner is able to apply his discretion under subsection 104-190(2) of the ITAA 1997 to extend the time period for you to acquire a replacement asset.