Private ruling: Small business rollover concession on a capital gain
Date of advice: 23 January 2018
Published: June 2018
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2016

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 legislative provisions: Income Tax Assessment Act 1997 Subdivision 152-E | Income Tax Assessment Act 1997 section 104-185 | Income Tax Assessment Act 1997 section 104-190 | Income Tax Assessment Act 1997 section 104-197

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. A condition of choosing the rollover is that you must replace the active asset or incurred expenditure on a capital improvement to an existing asset by the end of the replacement asset period. 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 (subsection 104-190 of the ITAA 1997). 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 may be extended or modified by the Commissioner (subsections 104-197(5) and 104-190(2) 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 extend the replacement asset period to 30 June 2019.

Relevant facts: Entity A made a capital gain when an active asset was sold. | Entity A utilised the small business active asset and small business rollover concessions for the sale of the business property. | Entity A started to look for a replacement asset soon after the sale. Entity A has found a replacement asset and is currently working on securing and coming to an agreement on the asset. | The contract to purchase the asset has been signed with settlement a few months after. The contract is subject to an approval. | Entity A estimates that an agreement for the purchase of the new asset will be formed by 30 June 2019. | Entity A satisfies the basic conditions to access the small business capital gains tax (CGT) conditions including the active asset test.