Private ruling: Commissioner's discretion - replacement asset period
Date of advice: 26 November 2025
Published: 12 January 2026
Ruling period: Income year ending 30 June 20XX | Income year ending 30 June 20XX | Income year ending 30 June 20XX | Income year ending 30 June 20XX | Income year ending 30 June 20XX | Income year ending 30 June 20XX

Ruling: Q1: Will the Commissioner exercise the discretion under subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the replacement asset period relating to the disposal of AA? | A1: Yes, to DD XXX 20XX

Relevant facts and circumstances: We have adopted, subject only to slight change, the abbreviations and definitions set out in the application for a private ruling submitted on behalf of the Taxpayer. Most relevant are those set out underneath. Table 1: Abbreviations Abbreviation Definition The Taxpayer B's spouse. Business The business which, until recently, was wholly owned and operated by the Company. Buyer Unrelated third party who has bought, or will buy (as applicable) the Properties from B and the Taxpayer. Company The Company is wholly owned by the Trust. The Taxpayer is its sole director. AA Part of the property located at xxxx which was wholly owned by the Taxpayer. B Taxpayer's spouse. Partnership The partnership called xxxx comprising of 2 partners (the Taxpayer and B), each of whom own a 50% interest. It does not carry on a business. Its sole activity is to derive rental income from BB. Properties A reference to AA, BB and CC collectively. BB Part of the property located at xxxx which is wholly owned by the Partnership. CC The property located at xxxx which is wholly owned by the Taxpayer Trust The discretionary family trust and sole owner of the Company since the Company's incorporation. The Taxpayer is the primary beneficiary of the Trust. Trustee The company called xxxx, wholly owned by the Taxpayer and the trustee of the Trust. The Taxpayer and B are its directors. The Taxpayer and B are Australian residents for tax purposes. Neither of them carry on a business in their personal capacity and they do not reasonably expect to do so. The Company was incorporated in order for the Taxpayer to take over the family's X operations following the taxpayers parent's death. The Business was operated by the Company since shortly after its incorporation until the income year ended 30 June 20XX. The Company's main use of each individual property was not X. The Taxpayer entered into a contract for the purchase of AA on DD Month 20XX for $X. The contract for that purchase settled on DD Month 20XX. The Taxpayer entered into a contract for the purchase of CC on DD Month 20XX for $X. The contract for that purchase settled on DD Month 20XX. The Taxpayer and B, in their capacity as partners in the Partnership, entered into a contract for the purchase of BB on DD Month 20XX for $X. The contract for that purchase settled on DD Month 20XX. Since their acquisition, BB and CC were continuously used by the Company to carry on its Business pursuant to unwritten rental agreements in place between the owners of those properties and the Company. AA was continuously used by the Company (rent-free) to carry on its Business since its incorporation. A residence on AA (occupying approximately X% of the total land area of the Properties) was also used by the Taxpayer and their family as their residence. The Company's aggregated turnover (as that term is defined in section 328-115 of the ITAA 1997) was less than $2 million for the income year ended 30 June 20XX. The Taxpayer and A continually sought to dispose of the Properties to an unrelated third party since on or before 30 June 20XX. They requested and received a private ruling from the Commissioner for the 20XX and 20XX income years confirming their entitlement to the small business CGT concessions under Subdivisions 152-C, 152-D and 152-E of the ITAA 1997 in relation to any capital gains they were to make in relation to the disposal of the Properties. The Taxpayer and B undertook an Expression of Interest campaign with a real estate firm in the first half of the 20XX year and later marketed the Properties for disposal via private treaty sale. However, they did not manage to sell the Properties during the 20XX and 20XX income years. The Taxpayer and B subsequently underwent a lengthy negotiation process with the Buyer on varying aspects relating to the disposal of the Properties. As a result of this process: • The Taxpayer and the Buyer entered into a contract for the sale of AA on DD XXX 20XX for $X. The contract for that sale settled on DD XXX 20XX; and • The Taxpayer, B and the Buyer entered into a Put and Call Option Deed (Option Deed) on DD XX 20XX. Pursuant to the terms of the Option Deed: • The Taxpayer (in their capacity as Grantor in respect of CC) and both the Taxpayer and B (in their capacity as Grantor in respect of BB) have granted a call option to the Buyer (as Grantee) to purchase those properties for $X (the Purchase Price) on the terms and conditions set out therein. • The Buyer (as Grantee) has granted a put option to the Taxpayer (in their capacity as Grantor in respect of CC) and both the Taxpayer and B (in their capacity as Grantor in respect of BB) to require the Buyer to purchase those properties for the Purchase Price on the terms and conditions set out therein. • The consideration payable by the Buyer for the grant of the call option was a Call Option Fee of $X. The consideration payable by the Taxpayer and B for the grant of the put option was a Put Option Fee of $X. • The Buyer may exercise the call option at any time during the period commencing on DD XXX 20XX and expiring on DD XXX 20XX (the Call Option Term). • The Taxpayer and B may exercise the put option at any time during the period commencing on DD XXX 20XX and expiring 10 business days after that date (the Put Option Term). • The Buyer paid the Taxpayer and B a Security Deposit of $X before entry into the Option Deed to be held by the Taxpayer and B as a deposit under the contract for sale of land if the call option or the put option is exercised. • The Taxpayer, B and the Buyer were required to enter into a lease in respect of CC and BB on DD XXX 20XX. • The Buyer was required to pay the Taxpayer and B a Property Development Payment of $X to meet the cost of improvements carried out to the properties by the Buyer during the term of the Option Deed (Improvement Works). The lease referred to in the Option Deed is between the Taxpayer (in their capacity as lessor in respect of CC), both the Taxpayer and B (in their capacity as lessor in respect of BB) and the Buyer (in its capacity as lessee. The rent payable by the Buyer to lease these properties until such time as they are acquired is $X per annum, adjusted for indexation on each anniversary. CGT event A1 happened pursuant to subsection 104-10(1) of the ITAA 1997 as a result of the Taxpayer's disposal of AA. The time of that event pursuant to paragraph 104-10(3)(a) of the ITAA 1997 was when the Taxpayer entered into the contract with the Buyer for the disposal, i.e. on DD XXX 20XX. The Taxpayer made a capital gain pursuant to subsection 104-10(4) of the ITAA 1997 from the disposal of AA and expects that that capital gain may be reduced or disregarded under Division 152 of the ITAA 1997, including through the obtainment of the small business roll-over under Subdivision 152-E of the ITAA 1997. The Taxpayer and B intend to acquire a parcel of land to replace the Properties and intend to use the funds from the disposal of the Properties to acquire the replacement asset. Assumption 1. The call option will be exercised by the Buyer on or around DD XXX 20XX (the final day of the Call Option Term) and the contract for the sale of land in respect of CC and BB will be executed the day after. 2. The contract for the sale of land in respect of CC and BB will settle within 3 to 4 months of its execution (i.e. no later than XXX 20XX).

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 104-10(1) | Income Tax Assessment Act 1997 paragraph 104-10(3)(a) | Income Tax Assessment Act 1997 subsection 104-10(4) | Income Tax Assessment Act 1997 subsection 104-190(1A) | Income Tax Assessment Act 1997 subsection 104-190(2) | Income Tax Assessment Act 1997 section 104-197 | Income Tax Assessment Act 1997 section 104-198 | Income Tax Assessment Act 1997 Division 152 | Income Tax Assessment Act 1997 Subdivision 152-A | Income Tax Assessment Act 1997 Subdivision 152-C | Income Tax Assessment Act 1997 Subdivision 152-D | Income Tax Assessment Act 1997 Subdivision 152-E | Income Tax Assessment Act 1997 section 152-410 | Income Tax Assessment Act 1997 section 152-415 | Income Tax Assessment Act 1997 section 328-115 Further issues for you to consider | This private ruling is confined to the question addressed in the ruling. The Commissioner has not considered whether the relevant basic conditions under Subdivision 152-A of the ITAA 1997 are satisfied in respect of the capital gain made by the Taxpayer from the disposal of AA, nor can the previously issued private ruling be relied on given it does not apply to the year ended 30 June 20XX. | The Taxpayer may apply for another private ruling on this or any other matters.

Reasons for decision: Summary: All subsequent legislative references are to the ITAA 1997. The Commissioner has decided to exercise his discretion under subsection 104-190(2) to extend the replacement asset period relating to the disposal of AA to DD XXX 20XX. | Detailed Reasoning - Detailed reasoning: Pursuant to section 152-410 in Subdivision 152-E, a taxpayer can choose to obtain the small business roll-over for a capital gain where the basic conditions in Subdivision 152-A are satisfied for the gain. Where the small business roll-over is chosen, the taxpayer can choose to disregard all or part of each capital gain to which Subdivision 152-E applies (section 152-415). This roll-over may be chosen even if the taxpayer has not acquired a replacement asset at the time of choosing to obtain the roll-over. However: • CGT event J5 under section 104-197 will happen if the roll-over is chosen and a relevant replacement asset is not acquired (or fourth element expenditure has not been incurred) by the end of the replacement asset period; and • CGT event J6 under section 104-198 will happen if the roll-over is chosen and, by the end of the replacement asset period, the cost of a relevant replacement asset (or the amount of the fourth element expenditure incurred) is less than the amount of the capital gain disregarded under Subdivision 152-E. Subsection 104-190(1A) provides that if you choose a small-business roll-over under Subdivision 152-E for a CGT event that happens in relation to a CGT asset in an income year, the replacement asset period is the period: (a) starting one year before the last CGT event in the income year for which you obtain the roll-over; and (b) ending at the later of: (i.) 2 years after that last CGT event; and (ii.) ... Subsection 104-190(2) provides that the Commissioner may extend the replacement asset period. The Commissioner considers the following factors in determining whether to exercise the discretion to extend the replacement asset period pursuant to subsection 104-190(2): • 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 grant the extension; • whether it would be prejudicial to the Commissioner to grant further time (however, the mere absence of prejudice is not enough to justify the granting of an extension); • whether the extension will unsettle people other than the Commissioner, or unsettle established practices; • whether the extension will be fair to people in similar positions and the wider public interest; • whether there is any mischief involved; and • the consequences of granting the extension. If, as the Taxpayer expects, all or part of the capital gain they made from the disposal of AA can be disregarded under Subdivision 152-E, the replacement asset period for the CGT event that happened in relation to AA started on DD XXX 20XX (one year before the CGT event) and will end on DD XXX 20XX (2 years after the CGT event). As a replacement for the Properties, the Taxpayer and A intend to acquire a suitable parcel of land on which the Company may again carry on a business, and (understandably) intend to use the funds from the disposal of the Properties to acquire the replacement asset. On the assumption that: • the call option will not be exercised by the Buyer until DD XXX 20XX (or shortly before that date), being the final day of the Call Option Term under the Option Deed; • the contract for the sale of land in respect of BB and CC will be executed the day after (by no later than DD XXX 20XX); and • settlement of that contract for the sale of land will only happen by no later than XXX 20XX, it is acknowledged that the Taxpayer and B will only have access to a significant portion of the disposal proceeds once the contract for the sale of land in respect of BB and CC is settled, such that they will not reasonably be in a position to fund the acquisition of a new parcel of land which suitably replaces the Properties any sooner; and certainly not by DD XXX 20XX. Under these circumstances, it is considered appropriate that the replacement asset period for the CGT event that happened in relation to AA be extended in accordance with subsection 104-190(2). In this regard, it is noted that: • there is evidence of an acceptable explanation for a period of extension (as noted above) and it is fair and equitable in the circumstances to provide the extension; • there is unlikely any prejudice to the Commissioner if a period of extension is granted; • an extension is not likely to unsettle people or established practices; • an extension will be fair to people in similar positions; and • the Commissioner is not aware of any mischief involved. On the assumption that the contract for the sale of land in respect of BB and CC will be executed on or shortly before DD XXX 20XX, the replacement asset period for the CGT events that will happen in relation to these properties will end on or shortly before DD XXX 20XX pursuant to subsection 104-190(1A). It is therefore considered appropriate that the extension of the replacement assert period for the CGT event that happened in relation to AA be granted so that it aligns with the expected ending of the replacement asset period for the CGT events that will happen in relation to BB and CC, i.e. DD XXX 20XX.