Private ruling: Small business rollover
Date of advice: 15 May 2026
Published: 20 July 2026
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise his discretion under paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you an extension of time to make a choice in writing to apply the small business roll-over under Subdivision 152-E of the ITAA 1997 to a capital gain that arose in a specified income year? | A1: Yes. | Q2: Will the Commissioner exercise his discretion under subsection 104-190(2) of the ITAA 1997 for an extension of time to purchase a replacement asset to a specific date? | A2: Yes.

Relevant facts and circumstances: You want an extension of due date for Small Business CGT Rollover Relief (Active asset), to a specified date, because of: • Boundary realignment: The seller is obtaining the related supporting development approval with the local council, after which the parties will need to lodge the associated plan with the relevant authority. • Detailed due diligence period. • Negotiation and contemporaneoussettlement of current property to facilitate and support finance. • Preparation of X separate and complex contracts to account for the multiple purchasing entities. An active asset sale was made in the in a specified income year, but you wanted to buy another active asset under the same entity. The original contract of purchase of the active asset, was done in a specified income year, but the contract was not signed as the boundary identification issue was identified prior to signing. The next contract of purchase was done on a specified date, but the contract was not signed because the seller had to obtain supporting development approval from the local council, after which the parties will need to lodge the associated plan with a specific authority. The property is leased by the entity to a specific person who runs the primary production activity of specific farming activities. You calculated the capital gain and had done the active asset application, but the accountant missed to report the relevant information under the capital gain section of the tax return. You did not make a choice for the active asset small business rollover, when you lodged your specified income tax return, or thereafter. You intend to amend the entity's specified income tax return upon receipt of this ruling to make the rollover choice, report the capital gain, and claim the small business active asset rollover exemption, as the amendment remains within the allowable revision period.

Relevant legislative provisions: Income Tax Assessment Act 1997 paragraph 103-25(1)(b) | Income Tax Assessment Act 1997 subsection 104-190(2) | Income Tax Assessment Act 1997 section 152-410 Further issues for you to consider | This ruling is limited to the questions raised in the request for advice. We have not considered the basic conditions or any other conditions relevant to the circumstances. For more information on the small business capital gains tax concessions search for quick code (QC) 22655 at ato.gov.au

Reasons for decision: Summary: The failure to make the roll-over choice in the specified income tax return was an inadvertent omission rather than a deliberate decision. The taxpayer has demonstrated ongoing and genuine efforts to acquire a replacement active asset, with delays arising from circumstances outside their control. Accordingly, it is reasonable for the Commissioner to exercise discretion to allow an extension of time to make the roll-over choice under paragraph 103-25(1)(b) to a specified date and to extend the replacement asset period by a further specified date, under subsection 104-190(2). Granting these extensions is consistent with the policy intent of Subdivision 152-E, which is to facilitate the reinvestment of capital proceeds by small businesses without triggering immediate CGT liabilities. | Detailed Reasoning - Small business CGT roll-over: The small business CGT roll-over under Subdivision 152-E of the ITAA 1997 allows eligible small businesses to defer all or part of a capital gain arising from the disposal of an active asset, provided the basic conditions for the small business CGT concessions are satisfied. Under section 152-410 where a replacement asset is acquired, or capital improvements are made to an existing asset, the deferred capital gain isrolled over and only brought to account when the replacement or improved asset is later disposed of. If the roll-over is chosen, the capital gain is not included in assessable income in the year the original CGT event occurs. The roll-over may be chosen before a replacement asset is acquired or improvement costs are incurred. However, the same entity that chooses the roll-over must also acquire the replacement asset generally two years from the CGT event. If no replacement asset is acquired or insufficient expenditure is incurred, further CGT events may arise. | Detailed Reasoning - Choices: Section 103-25 of theITAA 1997, explains the timing and manner in which choices under Part 3-1 or 3-3 must be made. Under subsection 103-25(1) choice must be made by the time the taxpayer lodges their income tax return for the income year in which the relevant CGT event occurred, or within additional time the Commissioner allows. The general rule is that a choice available under the CGT provisions once made cannot be changed. A taxpayer who has considered the application of the CGT concessions and chosen a particular concession has made a choice which cannot later be changed. However, a taxpayer who did not consider the CGT concessions and accordingly included a capital gain in their income tax return has not made a choice and can, if the Commissioner allows further time, later make a choice for a CGT concession and amend their return to reduce or disregard the capital gain. In this case, due to an oversight, the taxpayer did not consider any of the CGT concessions and hence did not make any choice. The replacement asset period for the small business rollover begins one year before the last CGT event in the relevant income year and ends the later of two years after that event, or later where a look-through earnout right applies, up to six months after the latest time a financial benefit becomes due or could become due. The Commissioner also has discretion to extend this period where appropriate under section 104-190. | Detailed Reasoning - Choice to Apply the Roll-over: Under section 152-410 of the ITAA 1997, a taxpayer may choose the small business roll-over even if a replacement asset has not yet been acquired. However, section 103-25 requires that such a choice be made by the time the income tax return is lodged for the income year in which the CGT event occurred, unless a later time is allowed by the Commissioner under subsection 103-25(1). In this case, although the capital gain was calculated and eligibility for the active asset concession considered, the choice to apply the small business CGT roll-over was not made in the 20XX income tax return, due to an omission by the taxpayer's accountant. Accordingly, the statutory deadline for making the choice was not met. However, subsection 103-25(1) allows the Commissioner to grant an extension of time to make the choice. Amending the trust's 20XX income tax return to include the capital gain and apply the roll-over is therefore contingent on the Commissioner allowing additional time. | Detailed Reasoning - Replacement Asset Period and Extension of Time: The replacement asset period generally ends two years after the CGT event, although the Commissioner may extend this period under section 104-190 of the ITAA 1997. The facts demonstrate that the taxpayer has made genuine and ongoing efforts to acquire a replacement active asset within the required period: • A purchase was actively pursued on a specified date, but the contract was not executed due to a boundary identification issue identified prior to signing. • A further contract was negotiated on a specified date, but execution was delayed because the seller was required to obtain supporting development approval from the local council and lodge a revised plan with a specified authority. • Additional delays arose due to complex due diligence, the need for contemporaneous settlement of an existing property to support financing, and the preparation of multiple contracts for different purchasing entities. These delays are largely outside the taxpayer's control and are consistent with circumstances in which the Commissioner has previously exercised discretion to extend the replacement asset period. On this basis, the taxpayer's request for a further 12-month extension of the replacement asset period is reasonable and aligns with the purpose of Subdivision 152-E of the ITAA. | Detailed Reasoning - Conclusion: Based on the facts, the taxpayer satisfies the substantive eligibility requirements for the small business CGT roll-over. The failure to make the roll-over choice in the specified income tax return was an inadvertent omission rather than a deliberate decision. The taxpayer has demonstrated continuous and genuine efforts to acquire a replacement active asset, with delays arising from matters outside their control. Accordingly, it is reasonable for the Commissioner to: • Allow an extension of time under paragraph 103-25(1)(b), to make the choice for the small business CGT roll-over via an amended return, to a specified date; and • Extend the replacement asset period to a further date, under subsection 104-190(2). Granting these discretions is consistent with the policy intent of Subdivision 152-E, which is to facilitate the reinvestment of capital proceeds by small businesses without triggering immediate CGT liabilities.

Question 2: Will the Commissioner exercise his discretion under section 104-190(2) of the IITAA 1997) for an extension of time to purchase a replacement asset to a specific date?