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Edited version of your written advice
Authorisation Number: 1013070697269
Date of advice: 12 August 2016
Ruling
Subject: Capital Gains Tax - Rollover Relief - Compulsory acquisition
Question 1
Will the Commissioner exercise his discretion under subsection 124-75(3) of the ITAA 1997 to further extend the time required to obtain a replacement asset for a compulsorily acquired asset to 30 June 2018?
Answer
Yes.
This ruling applies for the following periods:
Year ending 30 June 2017
Year ending 30 June 2018
The scheme commences on:
1 July 2016
Relevant facts and circumstances
You are the registered proprietor as tenants in common of land (referred to as the Property).
The Property has been used by you in carrying on a primary production business in partnership.
It has always been your intention to farm the Property, however if health dictated, to lease it.
A government authority compulsorily acquired part of the Property.
The remaining part of the Property continues to be held by as tenants in common in equal shares.
The government authority has made an initial offer of compensation.
You have submitted a response to the offer based on an expert valuation you obtained.
The government authority has since repeated its offer for the market value of compensation.
You are still finalising your claim for compensation pursuant to the Land Acquisition and Compensation Act 1986. You advised that at the present time an anticipated settlement date is unknown.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subdivision 124-B
Income Tax Assessment Act 1997 Subsection 124-75(3)
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 capital gains tax (CGT) asset. Under subsection 124-75(3) of the ITAA 1997, 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:
Graeme had a commercial property compulsorily acquired by a State authority. Graeme is having a protracted legal dispute with the authority over the quantum of the compensation. On these facts, we would accept that there are special circumstances to allow further time.
In determining if the discretion would be exercised the Commissioner has considered the following factors:
• 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, and
• a consideration of the consequences.
Application to your circumstances
You have a similar case to the example provided in TD 2000/40 in that there has been an ongoing legal dispute over the quantum of compensation you should receive as a result of a compulsory acquisition of your property. Taking your circumstances and the above principles into account, the Commissioner will allow an extension of time.
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