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Ruling

Subject: Compulsory acquisition

Question

Will the Commissioner exercise his discretion under paragraph 124-75(3)(b) of the Income Tax Assessment Act 1997 to allow further time for you to acquire a replacement asset?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2013

The scheme commences on:

1 July 2012

Relevant facts and circumstances

The company operates as an investment company and holds numerous parcels of land and earns rent from some of these properties.

A portion of land was compulsorily acquired by a government organisation.

A dispute arose between the company and the government organisation in relation to the valuation of the land compulsorily acquired and therefore the compensation to be provided in respect of the compulsory acquisition.

Due to the ongoing dispute, compensation has been received in instalments.

The dispute has now been settled and the final payment has been made.

Various assets have been acquired at or around the time compensation was received.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 124B,

Income Tax Assessment Act 1997 section 124-75,

Income Tax Assessment Act 1997 subsection 124-75(1),

Income Tax Assessment Act 1997 subsection 124-75(2), and

Income Tax Assessment Act 1997 124-75(3)(b).

Reasons for decision

Subdivision 124-B of the Income Tax Assessment Act 1997 (ITAA 1997) explains the circumstances when a rollover is available for an asset that is compulsorily acquired, lost or destroyed.

If you receive money as a result of the compulsory acquisition, you can only choose a rollover if you incur expenditure in acquiring another CGT asset. Under subsection 124-75(3), you must incur at least some of the expenditure no earlier than one year before the event happens or, within one year after the end of the income year in which the event happens.

This period may be extended in special circumstances as outlined in the following example in Taxation Determination TD 2000/40:

Having regards to your full circumstances and the above principles, the Commissioner will allow an extension of time.

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