Private ruling: Capital gains tax
Date of advice: 10 September 2015
Published: September 2015
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

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? | A1: Yes

Relevant facts and circumstances: You conducted business activities on your property which was purchased in XXXX. The land did not suit your operations and therefore limited your ability to expand your operations. You put this property up for sale in XXXX. Due to the global financial crisis there was little interest in the property and extreme weather in early XXXX further hampered your efforts to sell. In XXXX you listed the property with a different real estate agent. In XXXX, you found a suitable replacement property and despite not having sold your other property you purchased the new property. A contract of sale for your original property was entered into on the XXXX and settlement occurred in XXXX. The property was available for sale and listed on the market for the entire period.

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

Reasons for decision: Summary: 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 the replacement asset in XXXX, approximately X months prior to the disposal of your property. 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 the property for sale in XXXX. You were unable to sell the property in time to ensure the purchase of the new property 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 your property 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 the replacement asset, being XXXX.