Private ruling: EOT - replacement asset
Published: May 2015
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2014

Ruling: Q1: Will the Commissioner, pursuant to subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997), extend the time limit for the replacement asset to be acquired to XX/XX/XXXX? | A1: Yes.

Relevant facts and circumstances: You disposed of a business and therefore had a CGT event during the 2012-13 financial year. You elected to defer the capital gain under the small business roll-over concession. You have been looking to set up a new business. The set-up of this business has been delayed by hold ups in the construction of the new premises that were outside of your control. Your new premises are nearly ready and a lease has been signed by the end of the 2014-15 financial year. The estimated set up costs in relation to the new business will be in excess of the capital gain that was rolled over.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 104-185(1) | Income Tax Assessment Act 1997 subsection 104-190(2) | Income Tax Assessment Act 1997 Subdivision 152-A

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. The conditions which must be met to obtain relief are set out in Subdivision 152-A of the ITAA 1997. For you to obtain a roll-over, subsection 104-185(1) of the ITAA 1997 requires you to acquire a replacement asset, and that it be an active asset of yours, within a period starting one year before, and ending two years after the date of disposal of the original asset. Subsection 104-190(2) of the ITAA 1997 states that the Commissioner may exercise his discretion to extend those time limits. You disposed of your business during the 2012-13 financial year. The two year limit in which to find a replacement consequently expired during the 2014-15 financial year. During this period, you have been trying to finalise your new business venture. Due to delays with your new premises, you have been unable to begin a lease on your new premises. However, the building has now commenced construction and a lease has been signed. In determining if the discretion would be exercised the Commissioner has considered the following factors: • evidence of an acceptable explanation for the period of the extension requested (and whether it would be fair and equitable in the circumstances to provide such an extension) • prejudice to the Commissioner which may result from the additional time being allowed (but the mere absence of prejudice is not enough to justify the granting of an extension) • unsettling of people, other than the Commissioner, or of established practices • fairness to people in like positions and the wider public interest • whether any mischief is involved, and • consequences of the decision. Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 104-190(2) of the ITAA 1997 and allow an extension of time until XX/XX/XXXX.