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Ruling

Subject: replacement asset - extension of time

Question

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 one year before the disposal of the asset being replaced?

Answer

Yes, an extension has been granted so that XX property will be a replacement asset of the YY property.

This ruling applies for the following periods:

1 July 2010 to 30 June 2011

The scheme commences on:

18 September 2009

Relevant facts and circumstances

You are in partnership that operates a beef cattle farming business.

On XX September 20XX you (jointly) purchased a block of land XX. The property was purchased for use as grazing land.

On XX February 20XX you subdivided and sold part of your property at YY. You have retained ownership of the remaining acres.

You advise the delay in selling YY property was as a result of council conditions imposed on the subdivision of the property;

· vegetation buffer - necessitated renegotiation with the council by the surveyors

· building parcel - renegotiated to change the size

· sealing of the bitumen driveways

· renegotiation of your driveway access.

Further, the purchaser had some financing issues.

You wish to use the small business replacement asset rollover concession for the resulting capital gain and you are seeking the Commissioners discretion to allow an extension of time so that the XX property will be a replacement asset for the YY property.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 104-185

Income Tax Assessment Act 1997 section 104-190

Income Tax Assessment Act 1997 subdivision 152-A

Reasons for decision

Summary

Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 104-190(2) of the ITAA 1997 and allow an extension to the time limit.

Roll-over relief

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 of the ITAA 1997. These conditions have not been considered in this ruling.

For you to obtain a roll-over, subsection 104-185(1) of the ITAA 1997 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) of the ITAA 1997 states that the Commissioner may exercise his discretion to extend those time limits.

Commissioner's discretion

In determining if the discretion would be exercised, the Commissioner must have 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.

You subdivided and sold part of your property at YY. You purchased the replacement asset outside the period one year prior to sale of YY.

You advise the sale of the YY took longer than expected due to complications with the subdivision and the need to renegotiate several issues with council. The sale contract was entered into five months outside the replacement asset period.

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.

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.

Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 104-190(2) of the ITAA 1997 and allow a reasonable extension to the time limit.

The extension will allow the XX property to be considered a replacement asset for the purposes of section 104-185 of the ITAA 1997.

Further issues for you to consider

This ruling does not consider if the basic conditions for small business relief under Division 152 of the ITAA are satisfied.