Edited version of your written advice

Authorisation Number: 1013045038276

Date of advice: 6 July 2016

Ruling

Subject: Capital Gains Tax - Extension of time to acquire a replacement asset

Question:

Will the Commissioner exercise his discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow you to choose as a replacement asset, an asset acquired more than two years after the disposal of the asset being replaced?

Answer

Yes, an extension will be allowed to XX/XX/XXXX.

This ruling applies for the following period:

Year ended 30 June 2016

The scheme commenced on:

1 July 2015

Relevant facts

You sold a property on which you operated a business.

You made a gross capital gain on the sale of the property.

You met the eligibility criteria for the small business capital gains tax (CGT) concessions.

You applied the 50% general CGT discount and the 50% active asset reduction and you elected to apply the small business CGT rollover to the remaining capital gain.

You signed a contract of sale to acquire a property on which to operate a business a few months after the two year period had expired.

The property was settled and you took possession of the property.

You were actively seeking a replacement property throughout the two year replacement asset period as you had inspected a large number of properties but were unable to secure a suitable property, in time. You have provided a number of reasons for why a replacement asset was not able to be secured within the two year time period.

Relevant legislative provisions

Section 104-10 Income Tax Assessment Act 1997

Subsection 104-185(1) Income Tax Assessment Act 1997

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

Reasons for decision

Unless otherwise specified, all legislative references in the following Reasons for Decision are to the Income Tax Assessment Act 1997.

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.

For you to obtain a rollover, subsection 104-185(1) requires you to acquire a replacement asset, and that it be, an active asset of yours, 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:

• evidence of an acceptable explanation for the period of the extension requested (and whether it would be fair and equitable in the circumstances to provide such an extension)

• prejudice to the Commissioner which may result from the additional time being allowed (but the mere absence of prejudice is not enough to justify the granting of an extension)

• unsettling of people, other than the Commissioner, or of established practices

• fairness to people in like positions and the wider public interest

• whether any mischief is involved, and

• consequences of the decision.

Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 104-190(2) and allow a reasonable extension to the time limit. Allowing an extension is not prejudicial to the Commissioner in this case nor is it unfair to other people in similar positions.

You have provided a reasonable explanation given the circumstances and an extension will be granted until XX/XX/XXXX.

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 can be found at Capital gains tax concessions for small business 2015-16, which is available on our website www.ato.gov.au.