| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1051491664337
Date of advice: 7 March 2019
Ruling
Subject: Capital gains tax – the compulsory acquisition of a capital gains tax asset and replacement asset roll-over
Question
Will an indirect investment in an Australian Property Trust satisfy the conditions of a replacement capital gains tax (CGT) asset under subsection 124-75(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes. An indirect investment in a property trust can be said to be used for the purpose of benefiting from rental income and capital growth from real property and can reasonably be viewed as being used for the same purpose or at least ‘a similar purpose’ as a direct investment in a rental property.
Therefore, as your original asset was a rental property, an investment in an Australian Property Trust will satisfy the requirements for a replacement CGT asset. Accordingly any capital gain that you make as a result of the partial compulsory acquisition on the property can be rolled over.
Further information about involuntary disposal of a CGT asset can be found by searching 'QC 17204' on ato.gov.au
This ruling applies for the following period:
Year ending 30 June 2019
The scheme commences on:
1 July 2018
Relevant facts and circumstances
You acquired a property in a relevant State after 20 September 1985 as tenants in common (the Property).
The Property was XX square metres in size.
You purchased the Property for the purpose of generating income and benefiting from capital growth.
The Property has been rented for the entire time you owned it.
By a Notice of Acquisition issued on XX February 20XX, an Authority compulsorily acquired X square metres of the Property. You retained ownership of the balance of approximately X square metres.
The partial compulsory acquisition was conferred by an Australian law.
The Authority will pay you monetary compensation for the partial compulsory acquisition of the Property.
You will make a capital gain as a result of the partial compulsory acquisition of the Property.
The Property continued to be rented out until it was sold.
You considered purchasing another rental property as a replacement asset, however the monetary compensation that will be received is insufficient to purchase a suitable replacement.
You have decided to invest the monetary compensation you will receive in an Australian Property Trust and will do so by 30 June 20XX.
You will hold the replacement asset (investment in the property trust) as a long term asset.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Subsection 108-5(2)
Income Tax Assessment Act 1997 Section 124-75
Income Tax Assessment Act 1997 Section 124-85