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Edited version of your written advice
Authorisation Number: 1051357423872
Date of advice: 5 April 2018
Ruling
Subject: Income tax – Capital gains tax – Rollovers – Compulsory acquisition
Question
Will the Commissioner exercise his discretion under paragraph 124-75(3)(b) of the Income Tax Assessment Act 1997 to allow an extension of time until the requested date, to obtain a replacement asset for an asset that has been compulsorily acquired by a government body?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June 201C
Year ended 30 June 201D
Year ending 30 June 201E
Year ending 30 June 201F
The scheme commences on
Mid 200A
Relevant facts and circumstances
In mid 200A, the Taxpayers acquired a block of land; they are residents for tax purposes.
In late 201B, the Public Transport Authority of State X issued the Owners a Specific Order that the Land was to be compulsorily acquired under the Land Administration Act 1997 (X) (the LLA).
In late 201B, the Specific Order was registered and the Public Transport Authority became the registered owner of the Land.
In mid 201C, the Owners submitted a claim to the Public Transport Authority for compensation.
In mid 201C, the PTA formally responded with an alternative offer.
In mid 201C, the Owners rejected the alternative offer.
In mid 201C, the PTA offered the Owners an advance payment plus interest pursuant to section 248 of the LAA 1997.
In mid 201C, the Owners agreed to the advance payment.
Between late 201C and mid 201D, the legal representative of the Owners and the PTA attempted to negotiate amicable terms for the discharge of the advance payment. Agreement was not achieved during this time.
In mid 201D, as agreement was not achieved, the PTA deposited the advance payment with the Relevant Court of State X (the Relevant Court) for holding until the matter is resolved.
In mid 201D, the Owners commenced an application to the Relevant Court to retrieve the advance payment.
In mid 201D, the Owners received the advance payment.
As of mid 201E the final compensation payable to the Owners has not been determined and legal proceedings are pending.
Relevant legislative provisions
Income Tax Assessment Act 1997
Section 124-70
Section 124-75
Subsection 124-75(3)
Paragraph 124-75(3)(b)
Reasons for decision
If you receive money as compensation for an Australian government agency compulsorily acquiring your CGT asset, you can choose a rollover if you incur expenditure in acquiring another CGT asset:
● 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 (sections 124-70 and 124-75 of the ITAA 1997).
Subsection 124-75(3) of the ITAA 1997 provides the Commissioner discretion to allow further time for acquiring the replacement CGT asset in special circumstances.
The term ‘special circumstances’ is not defined for the purposes of the ITAA 1997.
Taxation Determination TD 2000/40 Income tax: capital gains: what are 'special circumstances' for the purposes of subsection 124-75(3) of the Income Tax Assessment Act 1997? explains that whether special circumstances exist depends on the facts of each particular case and provides examples, including the following:
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.
The circumstances of your case are similar to the above example in that you (the Owners) are engaged in a protracted legal dispute over the quantum of compensation to be paid for the compulsory acquisition of land, which has not yet been settled.
Under the circumstances, the Commissioner will allow further time, until the requested date, for the Owners to acquire another asset.
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