Edited version of your private ruling

Authorisation Number: 1012549891472

Ruling

Subject: Small business rollover - extension to replacement asset period

Question 1

Will the Commissioner exercise his discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the beginning of the replacement asset period to the date you acquired Property B?

Answer

Yes

This ruling applies for the following period:

Year ending 30 June 2013

The scheme commences on:

1 July 2012

Relevant facts and circumstances

A relative of yours became unwell and asked if you would relocate to be closer to them for support.

You placed Property A on the market.

Property B, which was close to your relative was purchased in anticipation that Property A would sell.

Your family was separated for an extended period of time to ensure that both properties were maintained and to care for your relative.

Due to the global financial crisis, major flooding in the area and other unfavourable market conditions, you had to reduce the selling price of Property A numerous of times.

You continued your efforts to sell Property A, utilising various real estate agents and internet advertising. You finally sold Property A after reducing the selling price of to cover repayment of the mortgage, commission and legal costs. The sale took place more than 12 months after the acquisition of Property B.

You have chosen to apply the small business rollover to the capital gain made on the sale of Property A.

Relevant legislative provisions

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

Income Tax Assessment Act 1997 Section 109-5

Reasons for decision

Where a taxpayer elects to take advantage of the small business rollover, there are rollover conditions that must be satisfied by the end of the replacement asset period. This period starts one year before and ends two years after the last CGT event that occurs in the income year for which you choose the roll over, or a longer period that the Commissioner allows.

If the rollover conditions are not met within the replacement asset period the gain will become assessable.

You acquired Property B outside of the replacement asset period. However the Commissioner may extend the replacement asset period in certain circumstances (subsection 104-190(2) of the ITAA 1997).

The relevant factors in determining whether to extend the replacement asset period are:

· 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

· a consideration of the consequences.

In your case you had listed Property A for sale but were unable to sell it in time to ensure the purchase of Property B would be within the asset replacement period due to unfavourable market conditions.

In these circumstances, we consider that you have provided an acceptable explanation for the delay in disposing of Property A and that you made continuing efforts to that end. We do not consider that extending the asset replacement period would unsettle others or that any mischief is involved.

Accordingly, the Commissioner will exercise his discretion to allow an extension to the beginning of the replacement asset period to the acquisition date of Property B.