Edited version of your written advice

Authorisation Number: 1012706061349

Ruling

Subject: CGT - SBC - active asset rollover extension of time

Question 1

Will the Commissioner exercise his discretion under section 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the replacement asset period?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 2015

Year ending 30 June 2016

The scheme commences on:

1 July 2014

Relevant facts and circumstances

You disposed of an interest in a capital gains tax (CGT) asset in the 2011 financial year and incurred a capital gain on the disposal.

You utilised the small business rollover exemption under subdivision 152-E of the ITAA 1997 when lodging your return for the year ended 30 June 2011, with the intention of acquiring a replacement asset within the two year period.

Your intention is to acquire another asset, utilising the funds from the disposal of your original asset.

You have not been successful in your search for a replacement asset, despite your sustained efforts.

This has been influence by the following circumstances:

• The lack of suitable assets coming on to the market

• The continuing drought conditions in the region

• The reluctance of financiers to provide finance to prospective buyers

Over the past year you have inspected various properties in several different regions, however you have been unable to find a suitable asset.

Your spouse has experienced significant medical issues that have continued to occur since your last private ruling application.

You have had to nurse your spouse throughout the whole period, extending over several financial years.

These circumstances have seriously curtailed your efforts to search for a replacement property.

You have previously applied for and been granted extensions of time.

You seek a further extension of one year to extend the replacement period.

Relevant legislative provisions

Income Tax Assessment Act 1997 (ITAA 1997) section 104-185

Income Tax Assessment Act 1997 (ITAA 1997) section 104-190

Reasons for decision

The small business rollover allows you to defer the capital gain made from a 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;

• 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

• consideration of the consequences.

Your search for a suitable replacement asset has been prolonged due to a number of circumstances, such as the poor market for the asset, continued regional drought conditions, reluctance of financiers to provide finance, and your spouse's continual health issues. Although you have considered a number of assets over the past year, your efforts have been significantly impaired by your spouse's most recent health concerns and the lack of suitable replacement assets.

Having considered your situation, we consider you have made a genuine attempt to acquire a replacement asset. The extension of time that you are requesting is not unreasonable, given your circumstances. Accordingly, 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 replacement asset period will be extended, in accordance with your request.