Edited version of your private ruling

Authorisation Number: 1012447536492

Ruling

Subject: CGT concessions

Small business replacement asset rollover

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 subsection 104-185(1) of the ITAA 1997 for your replacement asset to be acquired?

Answer

Yes. An extension of time has been granted.

This ruling applies for the following periods:

Year ended 30 June 2011.

The scheme commences on:

1 July 2010

Relevant facts and circumstances

· You had placed your farm on the market to be sold as a whole unit. You were unable to find a buyer.

· In 2011 part of your farm was subdivided and sold separate to the rest of the property.

· The remainder of the property is still for sale.

· You have a buyer looking to acquire the other titles, dependent on that person obtaining finance.

· If the prospective buyer does purchase the land, you will be in a position to purchase a new farm.

Relevant legislative provisions

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

Income Tax Assessment Act 1997 Section 104-185

Income Tax Assessment Act 1997 Section 152-415

Reasons for decision

The conditions that must be met in order to obtain relief under the small business rollover provisions are set out in subdivision 152-E of the ITAA 1997. The rollover provisions allow a small business entity to defer the making of a capital gain from a capital gains tax (CGT) event happening in relation to a small business asset, if it acquires one or more replacement assets and certain conditions are satisfied.

One of the requirements to be satisfied for the small business rollover is that the replacement asset the taxpayer obtains satisfies the conditions set out in section 104-185 of the ITAA 1997.

Subsection 104-185(1) of the ITAA 1997 requires the taxpayer to acquire a replacement asset within the period starting one year before, and ending two years after the last CGT event happens in the income year for which the taxpayer obtains the small business rollover.

In your case, you applied the small business rollover concessions in respect of the sale of part of your farm.

It is your intention to acquire another farm as a replacement asset. However you are not yet in a position to do this. As the approved extension period has lapsed, the Commissioner may extend the replacement asset period as provided by subsection 104-190(2) of the ITAA 1997.

In determining whether to allow a longer period, the Commissioner will consider a range of factors, such as:

· Whether there is evidence of an acceptable explanation for the period of extension requested, and whether it would be fair and equitable in the circumstances to provide such an extension.

· Whether there is any prejudice to the Commissioner if the additional time is allowed (however the mere absence of prejudice is not enough to justify the granting of an extension).

· Whether there is any unsettling of people, other than the Commissioner, or of established practices.

· The need to ensure fairness to people in like positions and the wider public interest.

· Whether there is any mischief involved.

· The consequence of the decision.

The factors as they relate to you are discussed below.

You have had your farm on the market for a considerable period of time and as you were unable to find a buyer, subdivided the property to facilitate a sale of the whole or parts of the property. This is considered an acceptable explanation for the extension of time requested.

The granting of an extension will not give rise to prejudice to the Commissioner as you have been able to sell a portion of your property and your intent is to acquire another property.

There is no unsettling of any persons other than the Commissioner and nor would the granting of an extension of time result in any unfairness to people in similar circumstances. The ability to apply for an extension of time is available to the public and the granting of an extension of time, dependent upon the facts, is itself and established practice.

There is no mischief involved in the circumstances which have resulted in the request for an extension of time.

The consequence of granting an extension of time is that you will be eligible for the small business rollover concession. Therefore the capital gain that would have arisen will be disregarded to the extent set out in section 152-415 of the ITAA 1997. The purpose of subdivision 152-E of the ITAA 1997 is to allow small business taxpayers to use the relevant portion of the capital gain to acquire new CGT assets.

Having considered the relevant factors, The Commissioner will allow the extension of time under subsection 104-190(2) of the ITAA 1997.