Private ruling: Capital gains tax - replacement asset rollover - extension of time
Date of advice: 14 February 2017
Published: July 2017
Ruling period: Year ended 30 June 20ZZ
Date scheme commenced: 1 July 20YY

Ruling: Q1: 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 the property (property B)? | A1: Yes


Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 104-190(2) | Income Tax Assessment Act 1997 Section 109-5

Reasons for decision: Summary: The Commissioner will exercise his discretion under subsection 104-190(2) of the ITAA 1997 and extend the beginning of the replacement asset period to the date you acquired property 'B'. | Detailed Reasoning - Extension to the asset replacement period: The general rules for the acquisition of CGT assets are contained in section 109-5 of the ITAA 1997. The table in subsection 109-5(2) of the ITAA 1997 specifically states that where an entity disposes of a CGT asset to you, you acquire it when the disposal contract is entered into or, if none, when the entity stops being the asset's owner. You are taken to have disposed of property 'A' in 20YY, being the date of the contract of sale. Accordingly the replacement asset period is one year before, and two years after this date. You are taken to have acquired property 'B' on the contract date, in 20XX. This acquisition occurred 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 on in 20XX. You were unable to sell property 'A' in time to ensure the purchase of property B would be within the asset replacement period due to a downturn in the local economy. In these circumstances, we consider that you have provided an acceptable explanation for the delay in disposing of property A. 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.

Relevant facts: You owned a property (property A) | Property 'A' has been used by an associate trading entity that used property A in their business. | Due to a downturn in economic conditions, smaller business premises were required. | In 20XX you signed a contract to purchase a new property (property B). | Settlement for property 'B' occurred in 20XX. | You engaged a real estate agent in 20XX to lease or sell property 'A'. | You subsequently engaged the services of two separate real estate agents to reach a broader range of potential purchasers. | You made property 'A' available for lease in order to make it more attractive to potential purchasers. | Property 'A' remained on the market untenanted until 20YY when a lease agreement was completed. | Property 'A' was subsequently sold to the tenant in 20YY. | Property 'A' was valued at $X around the time it was placed on the market. | Property 'A' was sold at a lesser amount.