Edited version of private advice

Authorisation Number: 1052115214818

Date of advice: 5 May 2023

Ruling

Subject:CGT - replacement asset

Question

Will the Commissioner of Taxation (the Commissioner) exercise his discretion under subsection 124-75(3)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of time of six months until a later date in 20XX to incur expenditure in acquiring a replacement CGT asset that meets the conditions to claim roll-over under Sub-division 124-B of the ITAA 1997?

Answer

Yes

This ruling applies for the following period:

20XY

The scheme commenced on:

20XV

Relevant facts and circumstances

This private ruling is based on the facts and circumstances set out below. If your facts and circumstances are different from those set out below, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You held a property as a long-term investment for capital growth and to generate rental income.

You are an Australian tax resident and have been at all relevant times for the purposes of this ruling. You have also provided other details about your circumstances.

An authority of a State compulsorily acquired the Property.

There was a dispute over the quantum of the compensation for approximately a year after the compulsory acquisition.

You received the compensation shortly before the end of the income year by which you were required to incur expenditure to acquire a replacement property.

Also, there were several factors that affected your ability to purchase a replacement property, including the impact of the COVID-19 pandemic.

On a date in 20XW the Commissioner issued private ruling authorisation number XXXXXXXXXXXXX allowing an extension of one year for you to incur at least some of the expenditure in acquiring a replacement asset.

Since that time, you have acquired a property, however the total acquisition cost of this property is less than the amount of compensation.

You are persisting in your search for another property including:

(a)  continual monitoring of the market

(b)  scrutinising potentially suitable properties, and

(c)   competing with other buyers to seek to acquire suitable properties.

You have been seeking properties with total acquisition costs as close as possible to the amount of the compensation. This has proven challenging for numerous reasons including the limited supply of relevant properties.

Your personal circumstances continue to disadvantage you in competing with other buyers for the fewer properties.

Relevant legislative provisions

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

Income Tax Assessment Act 1997 section 124-70

Income Tax Assessment Act 1997 section 124-75

Reasons for decision

This is to explain how we reached our decision. This is not part of the private ruling.

All references made in these reasons for decision are to the Income Tax Assessment Act 1997 (ITAA 1997)unless otherwise stated.

Summary

The Commissioner will exercise his discretion under subsection 124-75(3)(b) to allow an extension of six months until a later date in 20XX to incur expenditure in acquiring another CGT asset.

Detailed reasoning

In Private ruling authorisation number XXXXXXXXXXXXX, the Commissioner allowed you further time until a date in 20XX to incur some expenditure in acquiring another CGT asset.

Since then, you have purchased a commercial property but have not expended all the compensation and have requested additional time until a later date in 20XX to incur some expenditure in acquiring another CGT asset.

As is relevant subsection 124-75(3) states that:

at least some of the expenditure must be incurred:

...

(b) no later than one year, or within such further time as the Commissioner allows in special circumstances, after the end of the income year in which the event happens.

There are no legislative provisions which provide guidance as to what may constitute special circumstances for the purposes of subsection 124-75(3). The matter depends on the facts of each case.

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 the expression special circumstances in the context of subsection 124-75(3) by its nature is incapable of a precise or exhaustive definition. Some examples of special circumstances are provided under the tax determination.

The Commissioner has considered your circumstances, several of which were referred to in your previous private ruling. They continue to have an impact on your efforts to acquire the additional CGT asset.

Although the Commissioner has already allowed an extension of one year, an additional six months would not necessarily result in unfairness to people in like positions.

As your situation falls within scope of what would be considered special circumstances the Commissioner will exercise his discretion under paragraph 124-75(3)(b) to allow an extension of six months until a later date in 20XX for you to incur some of the expenditure to acquire a replacement CGT asset.

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