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Edited version of private advice
Authorisation Number: 1051817359008
Date of advice: 23 March 2021
Ruling
Subject: Compulsory acquisition rollover relief
Question
Will the intended use of the XXXXXX property satisfy the "same" or "similar" purpose test for the purposes of subsection 124-75(4) of the ITAA 1997?
Answer
Yes. Taxation Determination TD 2000/42 provides guidance as to whether an asset is used for a similar purpose. The determination states that whether an asset is used for the same or similar purposes as another asset is a question of fact and degree.
The newly acquired property will solely be used by the taxpayers to derive share-farming income. The new asset will be used for a similar purpose as the original asset and satisfies the "similar" purpose test under subsection 124-75(4) of the ITAA 1997.
For more information on when a rollover is available please search QC 17204 on our website, ato.gov.au.
This ruling applies for the following period
Year ended 30 June 20XX
The scheme commences on:
20 September 20XX
Relevant facts and circumstances
The Taxpayers are registered owners of land and it was purchased in 20XX.
It has been the Taxpayers' main residence and has been used to derive the Taxpayers income.
A government department issued a notice of compulsory acquisition of XX,XXX square metres of the land.
The Taxpayers intend to access the rollover under Subdivision 124-B of the ITAA 1997 to acquire a replacement asset from the funds received under the compulsory acquisition.
They commenced their search for suitable replacement land to meet the conditions of the roll over and the Taxpayers acquired a replacement property.
The newly acquired property will solely be used by the taxpayers to derive income and the Taxpayers will not reside there.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 124-70
Income Tax Assessment Act 1997 Section 124-75