Edited version of your private ruling

Authorisation Number: 1012574577330

Ruling

Subject: Compulsory acquisition

Question 1

Will the Commissioner exercise his discretion under paragraph 160ZZK(1)(d) of the Income Tax Assessment Act 1936 (ITAA 1936) to allow you further time to make an election?

Answer

No

Question 2

Will Property B be treated as though you acquired it prior to 20 September 1985 for capital gains tax (CGT) purposes?

Answer

No

This ruling applies for the following periods:

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

The scheme commenced on:

1 July 2013

Relevant facts and circumstances

You acquired Property A prior to 20 September 1985. This property was your main residence for your entire period of ownership and was not used to produce assessable income.

Property A was compulsorily acquired and you received monetary compensation.

You did not make a written election to choose the rollover under section 160ZZK of the ITAA 1997 as you were not aware of the provisions.

You then acquired Property B and it became your main residence.

You are considering moving out Property B and leasing it out.

You have requested an extension of time to make the election to choose the rollover under section 160ZZK of the ITAA 1997 to enable Property B to be treated as having been acquired by you prior to 20 September 1985.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 160ZZK

Income Tax Assessment Act 1936 Paragraph 160ZZK(1)(d)

Reasons for decision

Section 160ZZK of the ITAA 1936 provides that a taxpayer may be entitled to rollover relief if an asset they own (the original asset) is compulsorily acquired and an amount of monetary compensation is received. The relief is only available if the taxpayer incurs expenditure in obtaining a new asset (the replacement asset). This section has been superseded by Subdivision 124-B of the Income Tax Assessment Act 1997, however section 160ZZK of the ITAA 1936 was in operation when your property was compulsorily acquired.

If a taxpayer is eligible and elects for this rollover relief to apply and the original asset was acquired before 20 September 1985, the replacement asset shall be deemed to have been acquired before that date.

As per paragraph 160ZZK(1)(d) of the ITAA 1936, the taxpayer is required to give notice to the Commissioner in writing, on or before the date of lodgement of the income tax return for the year in which the disposal took place that they have elected that this section apply in respect of the disposal. The Commissioner may allow further time for the taxpayer to make this election.

In determining if the Commissioner should use his discretion to allow an extension of time the following will be considered:

· there should be evidence of an acceptable explanation for the period of extension requested and that it would be fair and equitable in the circumstances to provide such an extension;

· account must be had to any prejudice to the Commissioner which may result from the additional time being allowed, however the mere absence of prejudice is not enough to justify the granting of an extension;

· account must be had of any unsettling of people, other than the Commissioner, or of established practices;

· there must be a consideration of fairness to people in like positions and the wider public interest;

· whether there is any mischief involved; and

· a consideration of the consequences.

Application to your circumstances

You did not make a written election to choose the rollover contained in section 160ZZK of the ITAA 1936.

After considering both the relevant factors for determining whether to exercise the Commissioner's discretion and the specific circumstances of this case, we consider that your circumstances do not warrant an extension of time. This is for the following reasons:

· In this case it is difficult to say there is evidence of an acceptable explanation for the period of extension requested. The reason for the delay is that there were no taxation consequences for you when your original asset was compulsorily acquired and you were not aware of any rollover provisions at that time. While we appreciate your circumstances, we do not consider this to be an acceptable explanation for the period of extension requested.

· While there is no suggestion of mischief in this case, it could not be considered fair to people in like positions to allow an extension of time. Another application with similar circumstances would be denied.

· To allow an extension of time of such a significant period of time is well in excess of usual practice without evidence of an acceptable explanation.

Therefore, the Commissioner will not allow further time for you to make an election. As you did not make an election, you do not satisfy all of the requirements contained in section 160ZZK of the ITAA 1936 and are not eligible to apply the rollover. Accordingly, the replacement property you acquired will not be deemed to have been acquired prior to 20 September 1985 for CGT purposes.