Private ruling: Small business concessions
Published: February 2015
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Will the Commissioner, pursuant to subsection 104-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997), extend the time limit for the replacement asset to be acquired? | A1: No.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. As the result of a family separation and divorce, you placed two family agricultural properties on the market. The first property was sold during the 20YY financial year. There was an assessable capital gain from the sale of the property. When preparing your income tax return for the year ended 30 June 20YY, you elected to apply the small business capital gains concessions and applied the small business rollover. The second property has not yet sold. From offers made and valuations received, it is expected that you will make a capital loss on the sale of the second property. Previous offers to purchase have not been accepted as your ex-spouse will not meet the market. You are XX years of age and do not believe that you will ever be a position to deal in assets that would provide a capital gain against which to offset your anticipated capital loss. Until the second property sells, you have no financial resources to take advantage of the small business rollover exemption prior to the rollover period expiring. After the sale of the first property, you leased land to continue operating your livestock primary production business. You would consider purchasing a small property that may satisfy the small business rollover conditions if the second property sells.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 104-185(1). | Income Tax Assessment Act 1997 subsection 104-190(2). | Income Tax Assessment Act 1997 Subdivision 152-A.

Reasons for decision: Summary: In order to apply the small business rollover, a replacement asset must be acquired within two years after the relevant CGT event. However, the Commissioner may extend the replacement asset period in certain circumstances under subsection 104-190(2) of the Income Tax Assessment Act 199 7 (ITAA 1997). The relevant factors in determining whether to extend the replacement asset period are: • 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 • a consideration of the consequences. | Detailed Reasoning - Application to your circumstances: You and your ex-spouse disposed of a property in the 20YY financial year and made a capital gain. You were required to acquire a replacement asset within two years of the disposal date. In considering whether to exercise his discretion, the Commissioner needs to be satisfied that there were circumstances beyond your control that prevented you from finding a replacement asset within two years. You stated that the delay in purchasing a replacement asset was due to: • You believe that due to your age, you may not be a position in the future to purchase a replacement asset. • Until you sell the second property, you are not in a financial position to purchase a replacement asset. • You expect to make a capital loss on the sale of the second property. After considering both the relevant factors for determining whether to exercise the Commissioner's discretion and the specific circumstances of this case, we consider that your circumstances do not warrant an extension of time. While we appreciate your circumstances, the delay is of a different nature to the situations in which the Commissioner can exercise his discretion.