Private ruling: CGT - other - extension of time for a replacement asset
Published: July 2014
Ruling period: Year ending 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise the discretion available under section 124-75(3)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to provide you with an extension of time to acquire a replacement asset for the property that you previously owned? | A1: Yes.

Relevant facts and circumstances: You owned a property which you rented out to a company. The property was destroyed in a fire. You received insurance proceeds as compensation for damages. You analysed the feasibility of re-building as opposed to selling the property. The structure of your company and the limited resources available made decision making difficult and time consuming. You considered subdivision, but after lengthy delays that idea was not pursued. You have rolled over the capital gain to be offset against the cost of re-developing the property. Approval was sought to commence re-building the land and the construction commenced immediately. By 30 June 20XX, more than half of the re-build was completed. You expect the building will be completed soon.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 124-70(1) and | Income Tax Assessment Act 1997 Section 124-75.

Reasons for decision: Summary: Under subsection 124-70(1) of the ITAA 1997 you may be able to choose a roll-over if this happens to a CGT asset you own: (b) it, or part of it, is lost or destroyed. If you receive money for the destruction of the asset then further conditions are imposed by section 124-75 of the ITAA 1997. Under subsection 124-75(3) of the ITAA 1997 you must incur expenditure of a capital nature in repairing or restoring the CGT asset no earlier than one year before the disposal happens and no later than one year after the end of the income year in which the disposal happens, or within such further time as the Commissioner allows in special circumstances. In determining when special circumstances exist that will allow the Commissioner to extend the period for you to acquire a replacement asset regard must be had to Taxation Determination TD 2000/40. Taxation Determination TD 2000/40 provides guidelines for interpreting subsection 124-75(3) of the ITAA 1997, in particular what are special circumstances. In determining if the Commissioner should use his discretion to allow an extension of time the following will be considered: • 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. Having regards to your full circumstances and the above principles, the Commissioner will grant you an extension to acquire a replacement asset for the property that you previously owned which was destroyed in a fire.