Private ruling: SBC rollover - extension of time
Date of advice: 11 May 2016
Published: June 2016
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2015

Ruling: Q1: Will the Commissioner exercise the discretion available under subsection 124-75(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to provide you with an extension of time to acquire replacement assets? | A1: Yes.

Relevant facts and circumstances: You operate a commercial property rental business. You acquired rental car park land after September 1985. Your rental car park land was later involuntarily disposed of to a city council which resulted in you making a capital gain. You elected to apply the replacement asset rollover relief. You have been actively seeking other assets to purchase. You have already acquired some replacement assets but have not yet spent enough to cover the full amount of the capital gain. Because you operate a commercial property rental business you require properties which can be leased to clients. In addition, you advise that the prices of many properties in the area are too high for your business to make a profit off and this has delayed your search for replacement assets.

Relevant legislative provisions: Income Tax Assessment Act 1997 - Subsection 124-75(3)

Reasons for decision: Summary: Subdivision 124-B of the Income Tax Assessment Act 1997 (ITAA 1997) explains the circumstances when a rollover is available for an asset that is compulsorily acquired, lost or destroyed. If you receive money as a result of the compulsory acquisition, you can only choose a rollover if you incur expenditure in acquiring another CGT asset. Under subsection 124-75(3) of the ITAA 1997, you must incur at least some of the expenditure no earlier than one year before the event happens or, within one year after the end of the income year in which the event happens. This period may be extended in special circumstances as outlined in Taxation Determination TD 2000/40 Income tax: capital gains: what are 'special circumstances' for the purposes of subsection 124-75(3) of the Income Tax Assessment Act 1997? In determining if the discretion would be exercised the Commissioner must consider the following factors: • 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. | Detailed Reasoning - Application to your circumstances: You have been unable to acquire another asset due to a lack of suitable properties for sale in your area. Due to the nature of your business, it is accepted that a suitable replacement asset would have to be appropriately priced and able to be leased in order for your business to make a return. We consider that you have made ongoing efforts to acquire another replacement asset as evidenced by the fact that you have already acquired some other replacement assets. Having considered the relevant factors above, and the particular circumstances of your case, the Commissioner has applied his discretion and will extend the asset replacement period.