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Edited version of private ruling
Authorisation Number: 1011599043616
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Ruling
Subject: Capital gains tax (CGT) - compulsory acquisition - replacement asset roll-over - capital gain
1. Did you make a capital gain when your land was compulsorily acquired?
Yes.
2. Can you disregard the capital gain made from the disposal of your land?
No.
This ruling applies for the following period:
Year ended 30 June 2007
The scheme commenced on
1 July 2006
Relevant facts and circumstances
You and your spouse jointly purchased land after 20 September 1985.
Your land was compulsorily acquired by an Australian government agency and you received money consideration for the disposal of your land.
You made a capital gain on the disposal of your land.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-20
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Subsection 124-70(1)
Income Tax Assessment Act 1997 Subsection 124-70(2)
Income Tax Assessment Act 1997 Subsection 124-75(2)
Income Tax Assessment Act 1997 Subsection 124-75(3)
Reasons for decision
Capital gains tax
You may make a capital gain when a CGT happens to a CGT asset. The most common event is CGT event A1 which happens when you dispose of an asset to someone else.
You make a capital gain if the capital proceeds you receive for the disposal of the asset are more than the asset's cost base.
In your case, you entered into a contract to sell your land to an Australian government agency for monetary consideration. A CGT event A1 occurred when you entered into the contract and you made a capital gain on the disposal of your land.
Replacement Asset Rollover
In some situations you may be able to choose to defer your liability to pay tax on any capital gain arising when your CGT asset is compulsorily acquired by an Australian government agency. This is known as the replacement asset roll-over.
In order for you to be able to choose this roll-over, the following requirements must be met:
· you must have received money or another CGT asset, or both, as compensation for the loss of the original asset, and
· some expenditure must be incurred in acquiring another CGT asset no earlier than one year before the event happens, no later than one year after the end of the income year when the asset was compulsorily acquired, or any further period of time that the Commissioner allows.
In your situation, your land was compulsorily acquired by the Australian government agency and you received monetary consideration. To satisfy the other requirements for the roll-over, you should have incurred some expenditure acquiring a replacement asset one year after the end of the income year in which your land was acquired, or within further time as allowed by the Commissioner, for the replacement asset roll-over to be available.
Extension of Time
In the event that a replacement asset cannot be purchased, or expenditure can not be incurred towards the purchase of a replacement asset within the required time, the Commissioner's discretion can be sought for an extension of time to the purchase a replacement asset due to special circumstances.
Unless an extension of time is granted by the Commissioner, there are no other provisions to allow for expenditure to be incurred in the acquiring of the replacement asset after the end of the income year in which the event occurred.
If a replacement asset is not acquired within the specified periods, and an extension of time to acquire the asset has not been granted by the Commissioner, any capital gain made on the disposal of the asset must be included in the income tax return for the income year in which the asset was disposed of.
In your case, you did not acquire a replacement asset by the end of the financial year after your land was compulsorily acquired, nor did you apply to the Commissioner for an extension of time to acquire a replacement asset. Therefore, the capital gain that you made due to the compulsory acquisition of your land by the Australian government agency must be included in your income tax return in the income year in which the land was compulsorily acquired.
Note: While we acknowledge your situation, there are no provisions or legislation to allow you to disregard the capital gain that you made on the disposal of your land.
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