Private ruling: Capital gains
Published: February 2013
Ruling period: Year ending 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Question and answer | Will the Commissioner exercise the discretion available under subsection 104-190(2) of the ITAA 1997 to extend the period for you to obtain a replacement asset? | Yes

Relevant facts and circumstances: A number of years ago you sold an active asset and made a capital gain. Your intention was to buy a replacement premises for the business you operate via your private company within the specified two year time frame. However, due to limited opportunities, harsh/uncertain economic times and the large costs of relocation, an appropriate replacement active asset only recently became available. The replacement asset has now been acquired in joint names. You were actively looking for a replacement asset to purchase throughout this period and even looked overseas for an appropriate asset replacement. Your business employs a number of staff and due to the nature of your business appropriate premises were limited.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 152-5 | Subsection 104-185(1) | Subsection 104-190(2)

Reasons for decision: Detailed Reasoning - Small business replacement asset rollover: The small business roll-over allows you to defer the capital gain made from a Capital Gains Tax (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 roll-over, subsection 104-185(1) of the ITAA 1997 requires you to acquire a replacement asset within a period starting one year before, and ending two years after the date of disposal of the original asset. | Detailed Reasoning - Extensions to the period to acquire a replacement: 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 will consider the following factors (ATO ID 2001/619): · 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; and · a consideration of the consequences. In considering the factors outlined in ATO ID 2001/619: · the Commissioner will not experience any prejudice from the additional time being allowed; · other people or established practices will not be unsettled if the extension was granted; · people in like positions are also able to access extensions and the wider public interest will not be unduly affected; The Commissioner will exercise his discretion and extend the 2 year time period in which to replace an active asset to the date you purchased the asset.

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