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Edited version of your written advice
Authorisation Number: 1051368203324
Date of advice: 8 May 2018
Ruling
Subject: Capital gains tax
Question 1
Will the Commissioner allow you further time under paragraph 124-75(3)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) to acquire a replacement capital gains tax (CGT) asset
Answer
Yes.
Question 2
Can you rollover your capital gain from property X to property Y?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
Property X was involuntarily disposed of.
Property Y was purchased in late 20XX.
Property X was a positive geared investment property that was compulsorily acquired.
You were initially approached in early 20XX and negotiations stared in early 20XX.
Initially the compensation amount offered was unreasonable and the ensuing extended delays influenced your tenant to leave placing undue financial pressure upon your situation and negotiating position.
Continued unreasonable protraction in negotiations caused further delays and then in late 20XX a change in tempo allowed reasonable negotiations to resume and progress which led to a relatively swift conclusion to negotiations.
You finally exchanged a contract in very late 20XX and settlement was early 20XX.
Conditional exchange of property Y occurred as the property was not completed and a small holding deposit only was required due to the incomplete nature of the building.
Settlement of property Y was on very late 20XX and the relevant building certificates were received from local council and certificate of title was dated just before the end of 20XX.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 124-B
Income Tax Assessment Act 1997 Section 124-75
Income Tax Assessment Act 1997 Subsection 124-75(3)
Income Tax Assessment Act 1997 Paragraph 124-75(3)(b)
Reasons for decision
Subdivision 124-B of the Income Tax Assessment Act 1997 (ITAA 1997) explains the circumstances when a replacement asset rollover is available for an asset that is compulsorily acquired, lost or destroyed.
If you receive money as a result of a compulsory acquisition or when a CGT asset is lost or destroyed, you can only choose a rollover if you incur expenditure in acquiring another 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 Taxation Determination TD 2000/40:
In your case, you purchased a property less than 13 months before you exchanged contracts with the acquirer of property X.
Taking your full circumstances and the above principles into account, the Commissioner will allow an extension of time until the purchase of property Y.
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