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Edited version of your private ruling
Authorisation Number: 1012494171392
Ruling
Subject: Compulsory acquisition
Question 1
Will the Commissioner allow further time as provided in paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) for you to choose to apply the rollover concession in Subdivision 124-B of the ITAA 1997?
Answer
Yes.
Question 2
Will the Commissioner exercise his discretion under subsection 124-75(3) of the ITAA 1997 to further extend the time required to obtain a replacement asset for a compulsorily acquired asset?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2013
Year ending 30 June 2014
The scheme commences on:
1 July 2012
Relevant facts and circumstances
The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:
· the application for private ruling dated and
· the documents provided with the application for private ruling.
The trust acquired a commercial property after September 1985. The property was being used to produce rental income.
The property was compulsorily acquired and the trust was paid compensation in the 200X financial year.
The trust took legal action to contest the quantum of compensation received. This legal action involved a large outlay of money on legal fees, valuer's fees and other consultants.
As the trust was unsure whether the proposed legal action would result in further compensation, a capital gain was included in the trust's 200X income tax return.
A settlement was reached in the relevant financial year and a further payment was made to the trust by the party who acquired of the property.
The trust intends to apply the replacement asset rollover relief under subsection 125-75(4) of the ITAA 1997. A replacement asset has not yet been acquired.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 103-25(1)
Income Tax Assessment Act 1997 Subdivision 124-B
Income Tax Assessment Act 1997 subsection 124-75(3)
Reasons for decision
Question 1
The general rule is that a choice available under the CGT provisions once made can not be changed. Generally, such a choice must be made by the time the income tax return is lodged, or within such further time as the Commissioner allows (subsection 103-25(1) of the ITAA 1997).
A taxpayer who has considered the application of the CGT concessions and chosen a particular concession has made a choice which cannot later be changed. However, a taxpayer who did not consider the CGT concessions and accordingly included a capital gain in their income tax return has not made a choice and can, if the Commissioner allows further time, later make a choice for a CGT concession to apply and amend their return to reduce or disregard the capital gain.
In this case, the trust was unable to consider the application of the rollover concession until the legal action was finalised. The Commissioner considers it fair and equitable in these circumstances to exercise his discretion.
An extension of time is allowed for the trust to make the choice to apply the rollover concession.
Question 2
Subdivision 124-B of the Income Tax Assessment Act 1997 (ITAA 1997) explains the circumstances when a rollover is available for an asset that is compulsorily acquired, lost or destroyed.
If you receive money as a result of the compulsory acquisition, you can only choose a rollover if you incur expenditure in acquiring another CGT asset. Under subsection 124-75(3) of the ITAA 1997, you must incur at least some of the expenditure no earlier than one year before the event happens or, within one year after the end of the income year in which the event happens.
This period may be extended in special circumstances as outlined in the following example in Taxation Determination TD 2000/40:
Graeme had a commercial property compulsorily acquired by a State authority. Graeme is having a protracted legal dispute with the authority over the quantum of the compensation. On these facts, we would accept that there are special circumstances to allow further time.
Your case is similar to the example provided in TD 2000/40 in that there has been an ongoing legal dispute over the quantum of compensation you received. Taking your full circumstances and the above principles into account, the Commissioner will allow an extension of time.