Private ruling: Income tax – small business concessions – replacement asset rollover
Date of advice: 1 September 2018
Published: October 2018
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2017

Ruling: Q1: Can the purchase of a car be a replacement asset under section 152-420 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. A basic requirement for an asset to be eligible to be a replacement asset is that it must be an active asset. To be an active asset, the asset must be owned by a small business entity and be used or held ready for use in the course of carrying on a business. Section 108-5 of the ITAA 1997 includes a car in the definition of a CGT asset. In this case you intend to use the motor vehicles in your small business; therefore the motor vehicles you purchase are eligible replacement assets.

Relevant facts and circumstances: The company made a capital gain of $XX in the 20XX financial year. The company elected to utilise the small business rollover to defer part of this capital gain. The company is pursuing X as a business. The company intends to purchase two vehicles to facilitate this business. There will be X amount of private use on the vehicles. The company is a small business entity.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 152-420 | Income Tax Assessment Act 1997 Section 108-5