Private ruling: Replacement asset rollover - extension of time
Date of advice: 21 June 2022
Published: September 2022
Ruling period: year ended 30 June 20XX | year ending 30 June 20XX | year ending 30 June 20XX | year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise discretion pursuant to subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the small business capital gains tax (CGT) replacement asset period? | A1: Yes.

Relevant facts and circumstances: Person A (you) disposed of a CGT asset in December 20XX. In the relevant financial year income tax return, you made the choice to rollover the gain. Prior to disposal, the asset was not an active asset. You have made the decision to turn the asset into an active asset by investing a significant sum into the property. As a result of the pandemic and the general materials shortages, there have been significant delays in the work being completed. You expect the work to be completed with the business up and running by December 20XX. At this point the asset will become an active asset. You request an additional 18 month extension.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-185 | Income Tax Assessment Act 1997 Section 104-190 | Income Tax Assessment Act 1997 Section 152-10

Reasons for decision: Detailed Reasoning - Replacement Asset Rollover Relief: Subsection 104-185(1) of the ITAA 1997 requires you to acquire a replacement asset within a period starting one year before and ending two years after the date of disposal of the asset for which you are claiming the rollover. Subsection 104-190(2) of the ITAA 1997 allows the Commissioner to exercise discretion to extend the period for the small business rollover concession. It allows you to defer the capital gain made from a CGT event if you acquire one or more replacement assets and satisfy certain conditions. The Commissioner considers the following factors when determining whether to grant an extension to the asset replacement period: • Is there 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? • Is there 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)? • Will the extension unsettle people, other than the Commissioner, or established practices? • Will the extension be fair to people in like positions and the wider public interest? • Is there mischief involved? • What are the consequences of the decision? | Detailed Reasoning - Application to your circumstances: After considering your circumstances including the restricted supply of materials in the industry and the COVID-19 restrictions limiting your opportunities for work to be completed, the Commissioner considers it would be fair and reasonable for the purposes of subsection 104-190(2) of the ITAA 1997 to extend the replacement asset period. | Detailed Reasoning - Further issues for you to consider: In your request you have indicated that you qualify for the small business CGT concessions. The Commissioner has not considered your eligibility for the small business CGT concessions. You should ensure that you satisfy the basic conditions and any other conditions relevant to the small business roll-over concession.