Edited version of private advice

Authorisation Number: 1052363718514

Date of advice: 20 February 2025

Ruling

Subject: CGT - small business concessions

Question 1

Will the Commissioner allow an extension of time under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) until December 20XX to dispose of Property 1 to apply the small business rollover?

Answer 1

Yes. On consideration of all the facts and circumstances, including the delay of selling Property 1 being beyond your control, the Commissioner will exercise the discretion to extend the replacement asset period for disposing Property 1 to December 20XX to apply the small business rollover.

This ruling applies for the following periods:

Year Ending 30 June 20XX

Year Ending 30 June 20XX

The scheme commenced on:

September 20XX

Relevant facts and circumstances

In June 20XX, you purchased Property 1. You commenced using this farm for business purposes when the purchase settled.

In September 20XX, you secured the purchase of Property 2. When purchasing this farm, your intention was to sell Property 1 and use Property 2 as a replacement, as this was a larger farm with more scale. You commenced using Property 2 for business purposes upon purchase.

You both hold ownership interests in both farms.

In September 20XX, you listed Property 1 for sale as a result of purchasing Property 2. In November 20XX, you commenced subdividing this farm to assist with its sale.

In November 20XX, you received an offer for the purchase of Property 1. In November 20XX, paperwork was arranged to document the sale of this farm. Despite this, the purchaser drew out the sale and never signed a contract for the purchase.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 104-190(2)

Reasons for decision

If you chose a small business roll-over under Subdivision 152-E of the ITAA 1997, for a CGT event that happens in relation to a CGT asset in an income year, the replacement asset period, as defined under paragraph 104-190(1A)(a) of the ITAA 1997, begins one year before the last CGT event in the income year for which you obtain the rollover. As per subsection 104-190(2) of the ITAA 1997, the replacement asset period can also be extended at the Commissioner's discretion.

The relevant factors in determining whether to extend the replacement asset period are:

a)             whether there is 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,

b)             whether there is 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,

c)              whether there is any unsettling of people, other than the Commissioner, or of established practices,

d)             the need to ensure fairness to people in like positions and the wider public interest,

e)             whether there is any mischief involved, and

f)               the consideration of the consequences.

Application to your circumstances

You are yet to dispose of Property 1 and it has been more than one year since you acquired Property 2.

Since purchasing Property 2, you have made attempts to sell Property 1 and have implemented measures to assist with the sale. You listed Property 1 for sale after purchasing Property 2. To ease with the sale of Property 1, you also subdivided the asset.

You entered an arrangement to sell Property 1 in November 20XX after you purchased Property 2. The purchaser withdrew their offer as finance was not available.

When the arrangement fell through, you re-listed Property 1 back on the market. You experienced further difficulties with selling this farm due to a decrease in farming confidence.

After considering the relevant factors against the circumstances in this case, it is considered that there is a reasonable and acceptable explanation for the delay in the disposal of Property 1.

Accordingly, the Commissioner will exercise their discretion to an extension of time for you to dispose Property 1 to apply the small business rollover to the capital gain.

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