Edited version of private advice

Authorisation Number: 5010122994698

Date of advice: 04 March 2026

Ruling

Subject: CGT - extension of time

Question 1

Will the Commissioner exercise the discretion in subsection 124-75(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow the Trust further time, until 30 June 2027, to incur expenditure to acquire a replacement asset following the compulsory acquisition of its land, so as to satisfy the requirements for the roll-over in Subdivision 124-B of the ITAA 1997?

Answer 1

Yes

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

30 June 20XX

Relevant facts and circumstances

The Land owned by the Trust was compulsorily acquired.

The Trust sought and was granted extensions of time to acquire a replacement asset, having regard to the compulsory acquisition, the ongoing dispute in relation to the compensation amount, and the commencement and conduct of proceedings in court.

Significant compensation proceeds have been received.

Since receiving the final compensation payment, the Trust has been actively trying to find a suitable replacement asset comparable to the compulsorily acquired property. The Trust has inspected several properties and engaged in ongoing correspondence with property agents to identify an appropriate replacement asset. In addition, the Trust has been closely monitoring market conditions and undertaking feasibility assessments and due diligence in relation to potential properties.

However, the Trust has had trouble in acquiring a replacement asset due to the quantum of the compensation proceeds received, together with the market conditions and strong demand for properties of this nature. These factors have significantly limited the availability of comparable properties and have consequently prevented the Trust from acquiring a suitable replacement asset within 12 months.

Further, uncertainty surrounding the final compensation amount and the lengthy process involved in acquiring a property of this scale have delayed the Trust's ability to effectively search for, and ultimately acquire, an appropriate replacement asset.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 124-75

Reasons for decision

Summary

The Commissioner will exercise the discretion in subsection 124-75(3) of the Income Tax Assessment Act 1997(ITAA 1997) to allow the Trust additional time, until 30 June 2027, to incur expenditure to acquire a replacement asset.

Detailed reasoning

Subdivision 124-B of the ITAA 1997 provides a roll-over where a CGT asset is compulsorily acquired by an Australian government agency.

Under subsection 124-75(2), where money is received for the compulsory acquisition, the taxpayer must incur expenditure to acquire another CGT asset.

Subsection 124-75(3) requires that at least some of that expenditure be incurred within one year after the end of the income year in which the CGT event happens, unless the Commissioner allows further time in special circumstances.

The legislation does not define "special circumstances". Whether special circumstances exist 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" is incapable of precise or exhaustive definition and provides examples of situations where further time may be allowed.

Example 2 in TD 2000/40 illustrates circumstances where a taxpayer has taken reasonable steps to acquire a replacement asset, but events outside their control prevent completion within the prescribed period. In such circumstances, further time may be allowed.

In exercising the discretion under subsection 124-75(3), the Commissioner has had regard to whether the circumstances provide an acceptable explanation for the delay, whether it is fair and equitable to allow further time, and whether allowing the extension would be consistent with the purpose of the provision.

Application to circumstances

Your land was compulsorily acquired.

Following receipt of the final compensation, you have actively sought a replacement asset. However, the scale of the investment required has necessarily limited the pool of suitable replacement assets.

We accept that these circumstances are considered special circumstances for the purposes of subsection 124-75(3). They explain why you have not been able to incur expenditure on a replacement asset within the existing extended period.

Having regard to your continued intention to acquire a replacement asset and the steps taken since the legal proceedings concluded, it is fair and reasonable to allow additional time.

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