Edited version of private ruling

Authorisation Number: 1011546979409

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Ruling

Subject: CGT (CGT) small business concessions - extension of time to acquire a replacement asset

Will the Commissioner, pursuant to subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997), extend the time limit set out in paragraph 104-185(1)(a) of the ITAA 1997 for you to acquire a replacement asset?

Yes.

This ruling applies for the following periods:

1 July 2008 to 30 June 2009.

1 July 2009 to 30 June 2010.

1 July 2010 to 30 June 2011.

The scheme commences on:

1 July 2006.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You entered into an agreement to sell your property in the 2006-07 income year.

Some time later the mother of your children applied to Child Support for a Change of Assessment.

There were dealings with the Child Support Agency over a period of time which impacted on your ability to acquire a replacement asset.

You have provided documentation to support that you had been enquiring about properties, inspecting properties and making offers on properties after the sale of the property.

You have stated that the drought has impacted on the ability to acquire a replacement property but that conditions have improved in the last six months.

Relevant legislative provisions

Income Tax Assessment Act 1997 Paragraph 104-185(1)(a).

Income Tax Assessment Act 1997 Subsection 104-190(2).

Income Tax Assessment Act 1997 Section 152-415.

Income Tax Assessment Act 1997 Subdivision 152-E.

Does Part IVA apply to this ruling?

Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) is a general anti-avoidance rule that can apply in certain circumstances if you or another taxpayer obtains a tax benefit in connection with an arrangement and it can be concluded that the arrangement, or any part of it, was entered into or carried out by any person for the dominant purpose of enabling a tax benefit to be obtained. If Part IVA of the ITAA 1936 applies the tax benefit can be cancelled, for example, by disallowing a deduction that was otherwise allowable.

We have not fully considered the application of Part IVA of the ITAA 1936 to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part.

If you want us to rule on whether Part IVA of the ITAA 1936 applies we will first need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply.

For more information on Part IVA of the ITAA 1936, go to our website www.ato.gov.au and enter 'part iva general' in the search box on the top right of the page, then select: Part IVA: the general anti-avoidance rule for income tax.

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Replacement asset period

The replacement asset period is defined by paragraph 104-185(1)(a) of the ITAA 1997 as being the time starting one year before, and ending two years after, the happening of the last CGT event in the income year for which the small business rollover is obtained.

In your case, you have chosen to apply the small business roll-over concessions in respect of the sale of the property. In order to take advantage of the roll-over, your replacement asset(s) must be acquired two years after the CGT event.

You have not acquired the necessary replacement assets to cover the capital gain at the end of the replacement asset period. In this case the Commissioner may exercise his discretion to extend the time limit under subsection 104-190(2) of the ITAA 1997.

Commissioner's discretion

In determining if the discretion would be exercised, the Commissioner has considered the following factors:

· there should be evidence of an acceptable explanation for the period of extension requested and that it would be fair and equitable in the circumstances to provide such an extension

· account must be had to any prejudice to the Commissioner which may result from the additional time being allowed, however the mere absence of prejudice is not enough to justify the granting of an extension

· account must be had of any unsettling of people, other than the Commissioner, or of established practices

· there must be a consideration of fairness to people in like positions and the wider public interest

· whether any mischief is involved, and

· consideration of the consequences.

These factors as they relate to you are discussed below.

To support an extension of time:

· you have had extensive dealings with the Child Support Agency

· you have inspected a number of properties and made some offers and attended some auctions but were not successful

· the drought conditions contributed to the inability to acquire a replacement asset.

Factors that may not support an extension of time:

· from the date you signed the contract until the mother of your children had applied to Child Support you were not actively seeking a replacement asset

· it has been a number of years since the property was sold, some time outside the requirements of the legislation

· you had not previously applied for a private ruling.

We consider that you have provided an acceptable explanation for an extension of time. After weighing up all factors provided, it would seem fair and equitable to provide an extension of time in these circumstances.

The granting of an extension in the circumstances will not give rise to any prejudice towards the Commissioner.

There will not be any unsettling of any persons other than the Commissioner, nor will it unsettle any established practices as the granting of an extension of time to a taxpayer, dependent upon the facts, is itself an established practice.

The granting of an extension of time in the circumstances would not result in any amount of unfairness to people in similar circumstances or like positions to you. The ability to apply for an extension of time is available to the wider taxpaying public.

The consequences of granting the extension of time are that you will be eligible for the small business roll-over concession, and thus the capital gain that would have arisen will be disregarded to the extent set out in section 152-415 of the ITAA 1997. The purpose of Subdivision 152-E of the ITAA 1997 is to allow small business taxpayers to use the relevant portion of the capital gain to acquire new CGT assets. This will happen if the extension of time is allowed.

Conclusion

Having considered the relevant factors, the Commissioner is able to apply his discretion under subsection 104-190(2) of the ITAA 1997 to extend the time period for you to acquire a replacement asset.

Note: The Commissioner is unlikely to extend the period to purchase a replacement asset beyond this time.

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