Private ruling: CGT – SBC – replacement asset
Date of advice: 5 April 2018
Published: June 2018
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Will the Commissioner modify the starting date of the replacement asset period to DD/MM/YYYY, the date you acquired property B? | A1: Yes

Relevant facts and circumstances: Property A was an active asset. You acquired Property A after 20 September 1985. You listed property A for sale with a real estate agent. On DD/MM/YYYY you signed contracts to purchase property B. You made continuing efforts to dispose of Property A. On DD/MM/YYYY contracts were signed for the sale of property A.

Relevant legislative provisions: Income Tax assessment Act 1997 paragraph 104-185(1)(a) | Income Tax assessment Act 1997 subsection 104-190(2) | Income Tax assessment Act 1997 subsection 104-197(1) | Income Tax assessment Act 1997 subsection 104-197(5) | Income Tax assessment Act 1997 subsection 104-198(1) | Income Tax assessment Act 1997 subsection 104-198(4) | Income Tax assessment Act 1997 Subdivision 152-E

Reasons for decision: Summary: The rules covering the small business roll-over are contained in Subdivision 152-E of the Income Tax Assessment Act 1997 (ITAA 1997). The small business roll-over allows you to defer all or part of a capital gain made from a capital gains tax (CGT) event happening to an active asset. CGT event J5 happens if you choose a small business roll-over under Subdivision 152-E and you have not acquired a replacement asset by the end of the replacement asset period (subsection 104-197(1) of the ITAA 1997). CGT event J6 happens if, by the end of the replacement asset period, the cost base (first, second and fourth elements only) of the replacement asset(s) you acquired is less than the capital gain disregarded under Subdivision 152-E (subsection 104-198(1) of the ITAA 1997). The replacement asset period is the period starting one year before and ending two years after the last CGT event in the income year for which you obtain the roll-over (paragraph 104-185(1)(a) of the ITAA 1997). The replacement asset period may be extended or modified by the Commissioner (subsections 104-197(5) and 104-198(4) of the ITAA 1997). You disposed of property A on DD/MM/YYYY, being the date of the contract of sale. Accordingly the replacement asset period is one year before, and two years after this date. As you acquired property B on DD/MM/YYYY the acquisition occurred outside of the replacement asset period. In determining whether to modify the replacement asset period the Commissioner considers the following factors: ● whether there is evidence of an acceptable explanation for the modification requested and whether it would be fair and equitable in the circumstances to modify the period in such a way ● whether there is any prejudice to the Commissioner if the additional time is allowed (however, the mere absence of prejudice is not enough to justify the modification) ● whether there is any unsettling of people, other than the Commissioner, or of established practices ● the need to ensure fairness to people in like positions and the wider public interest ● whether there is any mischief involved, and ● the consequences of the decision. In your case, you listed property A for sale within the replacement asset period; however, due to factors outside of your control you did not dispose of the property during the relevant period. Having considered the relevant factors above, and the particular circumstances of your case, the Commissioner has applied his discretion to modify the start date of the replacement asset period to the date you acquired Property B.