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Edited version of your written advice
Authorisation Number: 1012897655217
Date of advice: 20 October 2015
Ruling
Subject: CGT - compulsory acquisition
Question
Will the Commissioner exercise his discretion under subsection 124-75(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the time required to obtain a replacement asset for a compulsorily acquired asset?
Answer
Yes.
This ruling applies for the following periods:
Year ending 30 June 2015
Year ending 30 June 2016
The scheme commenced on:
1 July 2014
Relevant facts and circumstances
You owned an interest in the Property.
The Property was compulsorily acquired. Settlement occurred after a significant period of time.
Until settlement occurred it was uncertain as to the quantum of compensation you would receive.
You began looking into a replacement asset during the 2014-15 income year. You entered into a contract to purchase a replacement property based on a property appraisal conducted by a real estate agent. The contract was subject to a formal valuation.
You arranged for a valuation which fell short of the original purchase price and the contract will not go ahead.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subdivision 124-B
Income Tax Assessment Act 1997 Subsection 124-75(3)
Reasons for decision
Subdivision 124-B of the 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 capital gains tax (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.
As per Taxation Determination TD 2000/40, the Commissioner may exercise his discretion to allow further time to acquire the replacement asset in certain circumstances.
Taking all of your circumstances into account, including the delay in receiving the compensation for the compulsory acquisition, the Commissioner will exercise his discretion under paragraph 124-75(3)(b) of the ITAA 1997 and extend the period for you to acquire the replacement asset.