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Edited version of private advice
Authorisation Number: 1012626193364
Ruling
Subject: Replacement asset
Question
Will the Commissioner exercise his discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the replacement asset period?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2014
The scheme commences on:
1 July 2013
Relevant facts and circumstances
You sold farming land, an active asset.
You declared the capital gain in the relevant year's return.
At this time a relative was ill and they have subsequently passed away.
A farm that was owned by your relative up until several years ago came onto the market and you purchased the farm more than two years after you sold the other farming land.
You are requesting an extension to the replacement asset period due to compassionate grounds.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 104-190(2)
Reasons for decision
In order to apply the small business rollover, a replacement asset must be acquired within two years after the relevant CGT event. However, the Commissioner may extend the replacement asset period in certain circumstances under subsection 104-190(2) of the ITAA 1997.
The relevant factors in determining whether to extend the replacement asset period are:
• 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 there is any mischief involved
• a consideration of the consequences.
Application to your circumstances
You sold farming land and bought new land more than two years later. You were required to acquire a replacement asset within two years of the disposal date.
In considering whether to exercise his discretion, the Commissioner needs to be satisfied that there were circumstances beyond your control that prevented you from finding a replacement asset within two years. You stated that when you sold your farming land a relative was ill and has subsequently passed away and you bought land that they had previously owned and that you would like an extension on compassionate grounds. This alone is not considered to be an acceptable explanation for the delay.
After considering both the relevant factors for determining whether to exercise the Commissioner's discretion and the specific circumstances of this case, we consider that your circumstances do not warrant an extension of time. This is for the following reasons:
• In your case it is difficult to say there is evidence of an acceptable explanation for the extension requested. The reasoning for the delay is purely a personal and private decision to acquire farming land that your relative previously owned. You have not provided any other documented attempts to acquire a replacement asset since the CGT event occurred.
• To allow an extension of time in your case is likely to unsettle people for the reasons discussed above, that is, lack of evidence of an acceptable explanation.
• While there is no suggestion of mischief in this case, it could not be considered fair to people in like positions to allow you an extension of time. Another application with similar circumstances would be denied.
Therefore, the Commissioner will not exercise the discretion under subsection 104-190(2) of the ITAA 1997 to extend the period for acquiring the replacement asset.
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