Private ruling: Capital Gains Tax - extension of time to acquire a replacement asset
Published: July 2012
Ruling period: 1 July 2012 to 30 June 2013
Date scheme commenced: 1 July 2008

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: Some years ago, you commenced a business under a partnership structure. The business held assets which were active assets of the business. You subsequently operated the business as a sole trader for a period of time. The business was then sold. You made a net capital gain on the sale of the active assets. You included that capital gain in the relevant income tax return following advice from your accountant. You subsequently received advice that you were able to choose the Capital gains Tax (CGT) small business rollover which would allow you to defer the capital gain from a CGT event provided that you acquire a replacement asset within a two year period. You have advised that you satisfy all conditions required to utilize the CGT small business concessions. There were complex matters involving the release of funds. Ongoing legal action left you in a state of uncertainty as to what would eventuate. That situation made it difficult for you to establish what funds you would have available from the sale of the business; the legal action potentially resulting in re-distribution of the funds with implications for your financial status. You applied to the Commissioner for an extension of the time limit to acquire a replacement asset. An extension was subsequently granted. Due to the circumstances, legal and otherwise, surrounding the disposal of the asset, you have been unable to acquire a replacement within the relevant period. As a consequence, you are now seeking a further extension of time.

Relevant legislative provisions: Section 104-10 Income Tax Assessment Act 1997 | Section 104-185 Income Tax Assessment Act 1997 | Section 104-190 Income Tax Assessment Act 1997

Reasons for decision: Summary: Unless otherwise specified, all legislative references in the following Reasons for Decision are to the Income Tax Assessment Act 1997 . Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 104-190(2) and allow a further extension to the time limit. | Detailed Reasoning - Detailed reasoning: 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. For you to obtain a roll-over, subsection 104-185(1) 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. Subsection 104-190(2) states that the Commissioner may exercise his discretion to extend those time limits. You contracted for the sale of the asset in question. The two year limit in which to find a replacement consequently expired. You sought and were granted an extension of time. 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. The previous extension that would require the replacement asset to be acquired by a certain date is extended by twelve months. The extension will allow the new asset to be considered a replacement asset for the purposes of section 104-185 of the ITAA 1997.

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