Edited version of your private ruling

Authorisation Number: 1012136486912

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: Commissioner's discretion

Question

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 the replacement asset to be acquired?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 2009

Year ending 30 June 2010

Year ending 30 June 2011

The scheme commences on:

1 April 2009

Relevant facts and circumstances

You owned a business premises which was leased to a connected entity. The connected entity used the business premises in its business.

You entered into a contract to purchase a new business premises.

This business premises meets the definition of an active asset in accordance with the requirements of section 152-40 of the ITAA 1997.

The business has moved to the new business premises and the old business premises remained vacant whilst you attempted to sell it.

You had a valuation prepared in order to sell the business premises within 12 months of purchasing the new business premises.

The business premises were listed with real estate agents on the internet.

You rejected several offers on the business premises as they were below market value.

You sold the business premises more than one year after purchasing the new business premises.

The contract to sell the old business premises was entered into more than a year after purchasing the new business premises. The capital gain derived form the sale of this business premises satisfied the basic conditions, and you are able to utilise the concession available under Division 152 of the ITAA 1997.

You would like to apply subdivision 152-E of the ITAA 1997 to the remainder of the capital gain. However, the time limit to acquire the replacement asset commenced after you purchased the new business premises.

You would like to request that the Commissioner extend the time limit required to acquire the replacement asset to earlier than 12 months before the CGT event.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-185

Income Tax Assessment Act 1997 section 104-190

Reasons for decision

The small business rollover 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.

For you to obtain a rollover, 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.

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;

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

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

o whether there is any mischief involved; and

o a consideration of the consequences.

Having considered your circumstances, with particular regard to the fact that:

· you have made a genuine attempt to comply with the requirements of subsection 104-185(1) by having the original property valued and listed for sale with the 12 month period of acquiring the replacement business premises and

· it is reasonable that you rejected earlier offers on the business premises that were below the market value,

· 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.

In view of this, the time limit that would require the replacement asset to be purchased no sooner than 12 months prior to the CGT event will be extended to commence earlier in accordance with your request.

Additional information

This ruling has not considered your eligibility for the small business rollover concession. You should ensure that you satisfy the basic conditions and the other conditions relevant for the concession. More information is available in the publication Advanced guide to capital gains tax concessions for small business 2010-11 (NAT 3359), which is available on our website www.ato.gov.au.