Edited version of private advice

Authorisation Number: 1051845757550

Date of advice: 29 May 2021

Ruling

Subject: CGT - compulsory acquisition

Question

Will the Commissioner exercise the discretion under paragraph 124-75(3)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of time to XX June 20XX for the acquisition of a replacement asset?

Answer

Yes.

Paragraph 124-75(3)(b) of the ITAA 1997 requires you to incur expenditure in acquiring a replacement CGT asset no later than one year after the CGT event or within such further time as the Commissioner allows in special circumstances.

Based on the facts and circumstances of your case, the activities you have undertaken and the events that have hindered your ability to acquire a replacement asset, the Commissioner finds it reasonable to exercise the discretion and allow an extension of time until XX June 20XX.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

G1 Trust, G2 Trust, G3 Trust and G4 Trust (you) acquired a property (the property) in 19XX as tenants in common with the following ownership interests:

•         G1 Trust - XX%

•         G2 Trust - XX%

•         G3 Trust - XX%

•         G4 Trust - XX%

You have the same corporate trustee, G Pty Ltd. The sole director of G Pty Ltd is S.

You are grouped for GST purposes with G1 Trust being GST Group Representative member.

The property was compulsorily acquired by an Australian government agency, with contracts exchanged April 20XX and settlement on XX June 20XX.

You chose to apply the compulsory acquisition rollover under subsection 124-70(1) of the ITAA 1997.

Rosehill was specifically developed property to meet specific requirements.

The Director has taken steps to find a suitable replacement property which will accommodate the specific requirements including:

•         May to October 20XX (prior to becoming aware that Rosehill would be compulsorily acquired) the Director inspected and obtained reports on 4 potential properties that may be suitable.

•         October 20XX to March 20XX the Director became aware that the property was to be compulsorily acquired and conducted lengthy negotiations with agreement and exchange of contacts occurring in April 20XX.

•         April 20XX to March 20XX, the Director continued to identify and inspect a number of potential properties, enlisting the services of an Agent to identify potential properties.

The Director's activities to identify and inspect potential replacement properties were hindered by the following events:

•         COVID-19 restrictions and lockdowns made inspection of prospective properties difficult and there were significant delays encountered in enquiries with vendors. Due to economic uncertainty at this time there were very few suitable properties on the market.

•         The Director's parent passed away on XX July 20XX following XX months of illness, during which the Director cared for the parent.

•         The Director was also impacted by the 2019-2020 bushfires.

A potential property has been identified, however there are challenges regarding planning and zoning being currently incomplete/delayed and the possible risk that the potential property may be compulsorily acquired in the future. A feasibility study is currently being prepared and time to consider if the property is suitable is required.

Relevant legislative provisions

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

Income Tax Assessment Act 1997 subsection 124-70(1)

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).