Private ruling: Capital gains tax - replacement asset extension of time
Date of advice: 1 June 2020
Published: July 2020
Ruling period: Financial year ending 30 June 2020 | Financial year ending 30 June 2021
Date scheme commenced: 01 July 2019

Ruling: Q1: Will the Commissioner exercise his discretion pursuant to subsection 124-75(3) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow up until 30 June 2021, for the taxpayers to incur expenditure in acquiring a replacement CGT asset? | A1: Yes Having considered the circumstances of both trusts and relevant factors, the Commissioner considers it appropriate to grant an extension of the replacement asset period. Further information can be found be searching 'QC 17204' on ato.gov.au

Relevant facts and circumstances: You elected to use the 2 year roll-over for Capital gains realised on the sale of a business, hoping to invest in a replacement asset in this time. The original gain was realised in mid-2018, with the 2 years being up mid-2020. You have been in contact with business agents to try and get an appropriate replacement asset from 2018. You were trying to find an opportunity in the suburbs to avoid the CBD but needed something that traded around office hours as you have a child at school. You first contacted the developer in mid to late 2019 when the tender for the site was in early stages at this time. They then contacted you in January to discuss lease terms. You have been working on it since and if it hadn't been for the national lockdown you believe you would have been in the process of fitting out the premises at this stage. The fear of the unknown with COVID- 19 made it too risky to commit to a lease however with the easing of restrictions now you feel more confident and back on track to have the premises operational by August." You hope to sign a Heads of Agreement in the next couple of weeks. This will mean that you won't be able to begin any construction of the fit out for some weeks as you have to have it designed first. Then the fit out period might be a few months. The current business conditions resulting from the Covid-19, are making it a longer than usual process to purchase or set up a new business.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 124-70 | Income Tax Assessment Act 1997 Section 124-75 | Income Tax Assessment Act 1997 Section 995-1