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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 July 2008

Relevant facts and circumstances

You owned property A.

You began negotiating with a company to sell property A.

Six months later, you began negotiations to purchase property B, dependent on the sale of the property A.

Negotiations with the company advanced so you shifted your focus to the purchase of property B.

The owners of the property B wanted security and a contract to purchase was executed.

The funds to purchase the property were advanced by the bank, but were dependent on the sale of property A.

You sold property A to the company more than 12 months after you purchased property B

You were approached by the company to sell property A before you commenced negotiations for the purchase of property B.

The purchase of property B was conditional on the sale of property A.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-185 and

Income Tax Assessment Act 1997 section 104-190

Reasons for decision

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.

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) 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;

· 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; and

· 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 commencing negotiations to sell the asset 6 months prior to starting negotiations for the acquisition of the replacement asset,

· the Commissioner is able to apply his discretion under subsection 104-190(2) 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.