Private ruling: Capital gains tax
Date of advice: 3 August 2015
Published: August 2015
Ruling period: Year ended 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) and allow you to choose as a replacement asset, an asset acquired more than two years after the disposal of the asset being replaced? | A1: Yes.

Relevant facts and circumstances: You and your spouse entered into a contract to sell a capital gains tax (CGT) asset in 20XX. You and your spouse applied the small business rollover concession to the capital gain from the disposal of this asset. The contract to purchase the replacement asset was signed more than 2 years after the disposal. You and your spouse consistently searched for a property to purchase throughout the replacement asset period. However, it was difficult to source a suitable property because of the general lack of properties on the market in the area within your budget. This was mainly due to the continued dry conditions which put properties in an unmarketable state. During the replacement asset period you and your spouse inspected a number of properties. You made several offers but each were declined.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 152-A | Income Tax Assessment Act 1997 section 104-185 | Income Tax Assessment Act 1997 section 104-190

Reasons for decision: Summary: 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, 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.