Edited version of private ruling

Authorisation Number: 1011742030976

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Ruling

Subject: Replacement asset - extension of time

Question 1

Will the Commissioner exercise his discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow you to choose as a replacement asset, an asset acquired more than two years after the disposal of the asset being replaced?

Answer

Yes.

This ruling applies for the following period

Year ending 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts

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 sold your business and made your choice to rollover the capital gain.

Since the asset was sold Mr and Mrs X have relocated to look for a replacement asset. In this time they have had several personal issues which have affected their ability in spending the required time in finding a replacement asset.

These personal issues, involving Mr and Mrs X, have required them to take full custody of their grandchild. This has involved an extensive court proceeding with full custody being granted by the Court. As well as dealing with the well being of their grandchild they have also had to deal with their children's health conditions. Their children have in the past number of years been hospitalised due to their medical conditions.

You have been actively looking for a business but unfortunately there have not been many businesses available to purchase. Also due to the pressure of the economic down turn many local businesses are not selling.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 104-185

Income Tax Assessment Act 1997 Section 104-190

Does Part IVA apply to this ruling?

Part IVA of the Income Tax Assessment Act 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 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 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 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, 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

The legislative references referred to herein are from the ITAA 1997, unless otherwise stated.

Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 104-190(2) and allow a further extension to the time limit.

Detailed reasoning

The small business roll-over allows you to defer the capital gain made from a Capital Gains Tax (CGT) event if you acquire one or more replacement assets and satisfy certain conditions. The conditions which must be met to obtain relief are set out in Subdivision 152-A.

For you to obtain a roll-over, subsection 104-185(1) 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 original asset. Subsection 104-190(2) states that the Commissioner may exercise his discretion to extend those time limits.

After your grandchild was born you commenced legal proceedings to seek full custody of the child. You have also had ongoing health issues with your children, who have been in and out of hospital in the past number of years. You were granted full custody of your grandchild.

You have been actively looking for a business but unfortunately there have not been many businesses available to purchase. Due to the pressure of the economic down turn many local businesses are not selling.

Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 104-190(2) and allow a reasonable extension to the time limit. Allowing an extension is not prejudicial to the Commissioner in this case nor is it unfair to other people in similar positions.

The extension that would require the replacement asset to be acquired no later than X is extended to X. The extension will allow the new asset to be considered a replacement asset for the purposes of section 104-185.

Please note it is unlikely that any further extensions will be allowed.