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Edited version of private advice
Authorisation Number: 1051837682446
Date of advice: 27 May 2021
Ruling
Subject: Extension of time to defer the capital gain on a compulsory acquired asset
Question
Will the Commissioner exercise his discretion under section 124-75(3)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension to time until 30 June 2022 to acquire a replacement asset?
Answer
Yes.
Subsection 124-75(3)(b) of the ITAA 1997 requires you to incur expenditure in acquiring a replacement CGT asset no later than one year after the CGT event or within such further time as the Commissioner allows in special circumstances.
Based on the facts and circumstances of your case, and the guidance provided in Taxation Determination TD 2000/40 Income tax: capital gains: what are 'special circumstances' for the purposes of subsection 124-75(3) of the Income Tax Assessment Act 1997?, the Commissioner will exercise his discretion to allow an extension of time until 30 June 2022.
This ruling applies for the following periods:
Year ended 30 June 2020
Year ending 30 June 2021
Year ending 30 June 2022
The scheme commences on:
1 July 2019
Relevant facts and circumstances
You owned a commercial property (the property).
You used the property to carry on a business.
You received a Proposed Notice of Acquisition from Company A for the property.
You entered a contract of sale for the property.
Settlement of the property occoured.
Due to the compulsory acquisition of the property, a Capital Gain Tax (CGT) event A1 pursuant to section 104-10 of the ITAA 1997 ccoured and resulted in a capital gain.
You applied the compulsory acquisition rollover to the capital gain.
You have experienced considerable difficulty in identifying and acquiring a suitable replacement asset due to the following:
A protracted settlement period financially restricting the acquisition of a replacement asset.
The impact of COVID-19 on the real property market, specifically regarding the national lockdowns, decrease in property listings and an increase in the purchase price due in turn to the lack of supply.
From DD MM YYYY to DD MMM YYYY, you actively engaged in searching for comparable replacement assets and actively attempted to acquire XX properties which proved unsuccessful.
You are currently in discussion with real estate agents and negotiating acquisition of properties.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 124-70
Income Tax Assessment Act 1997 Section 124-75