Edited version of private advice

Authorisation Number: 1051790484197

Date of advice: 16 December 2020

Ruling

Subject: CGT replacement asset - extension of time

Question

Will the Commissioner exercise his discretion under section 124-75 of the Income Tax Assessment Act 1997 to extend the time limit for a replacement asset/s in regard to assets (properties) compulsorily acquired?

Answer

Yes. Having considered the relevant facts, the Commissioner will apply discretion under subsection 124-75(3) of the ITAA 1997 and allow an extension of the time to 30 June 20XX.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

•                The taxpayers owned property on which they conducted a primary production business.

•                On the XX XX 20XX the property was compulsorily acquired by a Government Authority and an amount was paid for the property on the XX XX 20XX.

•                The value of the property became the subject of contention as similar sales in the area indicated the true value of the property was more than twice the amount offered and paid

•                Some additional compensation was received in year ending 30 June 20XX however this was still well below comparable property in the area

•                As such, the compensation due to the taxpayers has been subject to a protracted litigation process which is still ongoing, and a court hearing is scheduled for 20XX and mediation due to occur in XX XX 20XX.

•                Following the judgement, it is likely to take some time before the quantum of compensation is known, and expectation is this will not occur till mid 20XX

•                The taxpayers have full intention of purchasing a replacement asset to continue in the business of primary production.

•                The taxpayers have been actively searching for a suitable property so that on the finalisation of the court proceedings they will be in a position to buy a replacement asset as soon as possible

•                The taxpayers have encountered several issues in their search for a replacement property:

•                It has been virtually impossible to determine what would be an appropriate property given the level of compensation to be received is highly uncertain

•                The low level of compensation currently received has made it difficult to find a comparable property in the area and an appropriate price range

•                Impacts of COVID 19 have significantly affected levels of stock on the market and ability to inspect potential properties due to imposed restrictions.

•                During the time since the Authority acquired the properties, the taxpayers have undertaken a number of steps in understanding and carrying out their obligations including engaging solicitors, tax advisers and other professionals and have liaised with a number of real estate agents inspecting a number of potential properties.

•                Based on the above extenuating circumstances the taxpayers are seeking an extension of time until XX XXX 20XX.

The taxpayers intend to purchase a replacement asset, being an agricultural property to continue to conduct their primary production operation that was conducted prior to the compulsory acquisition.

Relevant legislative provisions

Income Tax Assessment Act 1997subsection 104-10(6)

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

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

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

Income Tax Assessment Act 1997subsection 124-75(4)

Income Tax Assessment Act 1997subsection 124-75(5)

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