Edited version of private advice

Authorisation Number: 1052118139923

Date of advice: 17 May 2023

Ruling

Subject: Capital gains tax

Question

Are you able to use the roll over relief in Section 124-70 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Based on the information provided to the Commissioner you are able to use the roll over relief in Section 124-70 of the ITAA 1997.

Section 124-70 of the Income Tax Assessment Act 1997 (ITAA 1997) allows CGT roll-over relief if an asset owned by the taxpayer is compulsorily acquired by an Australian government agency. A further requirement is that the owner of the original asset must receive money or another CGT asset or both for the CGT event to be eligible for roll-over. On satisfying these conditions, section 124-75 of the ITAA 1997 provides other requirements which must be satisfied if money is received for the event happening.

Under subsection 124-75(2) of the ITAA 1997, the owner of the asset must incur expenditure in acquiring another CGT asset. In accordance with paragraph 124-75(3)(a) of the ITAA 1997, at least some of the expenditure must be incurred no earlier than one year before the event happens, or under paragraph 124-75(3)(b) of the ITAA 1997, no later than one year after the end of the income year in which the event happens, or within such further time as the Commissioner allows in special circumstances.

Under subsection 124-75(4), where the original asset was not in any way connected to a business being carried on by you, the replacement asset must be used (for a reasonable period after it is acquired) for the same purpose, or a similar purpose, to the purpose for which the original asset was used just before the event happened.

The property was acquired by the State Government in a prior year.

You purchased land off your neighbour in the following year.

You will use this land as part of your home.

You meet the requirements under the legislation for roll over relief, with further time being allowed for you to acquire the replacement asset in this instance.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are a resident of Australia for taxation purposes.

Property Z is your main residence.

Property Z comprises a number of acres of land.

A significant proportion of your property was acquired by a State Government corporation, in order to facilitate a construction project.

The State Government compulsorily acquired the land in a prior year.

You were left with a number of acres of land following the sale.

You have treated the home and surrounding area as your main residence.

The residual of the land has not been farmed by you and acts as curtilage.

The land in and of itself has no purpose and has been used by you as part of your forever dream home.

You purchased the entire property over a decade ago.

The State Government body has paid you for the acquired land.

You wish to rollover the gain on the compulsory acquisition of your property to purchase 50% of your direct neighbour's property.

You paid for a 50% share of the neighbouring property, resulting in a capital gain being reported by you, following the utilisation of the rollover provisions.

You signed the contract for the land last year and it settled earlier this year.

You will use this land as part of your home.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 124-70

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