Private ruling: CGT - small business concessions
Published: March 2015
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise his discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the replacement asset period? | A1: Yes.

Relevant facts and circumstances: You operate a business from 2 neighbouring premises. One of the premises was very old and in need of repair. You obtained permits to develop the site, building a replacement business premises and apartments. After fully costing the project, you decided you did not have sufficient experience or resources to undertake the project. You then sold the premises with the permits to a developer with the agreement that you would purchase the new business premises back on completion of the project. In September 20XX, you signed the sale contract with the developer. In the 20XX income year, you accessed the small business CGT concession to rollover the capital gain into the new asset, the new replacement business premises. The total rolled over gain was $XXX,XXX. The agreed purchase price of the new replacement business premises is $XXX,XXX. Several issues have delayed the construction of the property. These issues have caused the project to be delayed which has extended the expected completion date of the project. You expected the project to be completed in January 20XX. You have previously requested, and were granted, an extension to the replacement asset period of 6 months to March 20XX in relation to the above CGT event that was rolled over. Since the extension to the replacement period was granted there have been further events which have delayed the project's completion. You have moved into and commenced using the new premises however the settlement of the purchase has not been effected to date. You have requested an extension to the replacement asset period of a further 6 months to September 20XX in relation to the above CGT event that was rolled over.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 104-190(2)

Reasons for decision: Summary: Where a taxpayer elects to take advantage of the small business rollover, there are rollover conditions that must be satisfied by the end of the replacement asset period. This period starts one year before and ends two years after the last CGT event that occurs in the income year for which you choose the rollover. However the Commissioner may extend the replacement asset period in certain circumstances (subsection 104-190(2) of the Income Tax Assessment Act 199 7). The relevant factors in determining whether to extend the replacement asset period are: • 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 to 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 • a consideration of the consequences. You rolled over a capital gain under the small business rollover for a CGT event that occurred on September 20XX. You have verbally agreed to purchase a newly constructed replacement business premises. However due to construction delays the premises was not ready in the required time frame. You have now moved into the premises, however there have been delays in settlement occurring. Having considered the relevant factors above, and the particular circumstances of your case, the Commissioner has applied his discretion and will extend the asset replacement period to September 20XX. | Detailed Reasoning - Further issues for you to consider: This ruling has not fully considered your eligibility for the CGT small business concessions; it has only addressed eligibility under the specified provisions of the ITAA 1997. You should ensure that you satisfy all the basic conditions and other relevant conditions for eligibility. More information is available in the publication Advanced guide to capital gains tax concessions for small business 2013-14 (NAT 3359), which is available on our website www.ato.gov.au .