Edited version of private advice

Authorisation Number: 1051857803903

Date of advice: 26 June 2021

Ruling

Subject: CGT compulsorily acquired asset roll-over - extension of time

Question

Will the Commissioner exercise his discretion under paragraph 124-75(3)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of time until 30 June XXXX for you to acquire a replacement asset?

Answer

Yes

Subsection 124-75(3)(b) of the ITAA 1997 required you to incur expenditure in acquiring a replacement CGT asset by 30 June 20YY '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 XXXX.

This ruling applies for the following periods:

Income year ending 30 June XXXX

Income year ending 30 June XXXX

Income year ending 30 June XXXX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

On DDMMYY, you acquired Land for $AA.

On DDMMYY, you received a Notice of Intention to Acquire (NOIA) the Land.

The Land was compulsorily acquired by the state government on DDMMYY.

On DDMMYY, you received a Notice of Acquisition which included the offer of compensation amount of $BB, inclusive of the estimated market value of the Land to be $CC.

You filed a Notice of Referral of a Disputed Claim to the Supreme Court in dispute of the amount.

While some compensation was received with respect to the amount prior to settlement of the dispute, the final balancing payment was not received until DDMMYY, following a successful mediation process

You have always intended to acquire a replacement asset(s) to fully offset the notional gain made on the compulsory acquisition.

You have acquired a property which satisfies the replacement asset requirements, but its cost does not fully absorb the full amount of then notional gain made on the compulsory acquisition.

The COVID-19 pandemic has placed significant delays on the functionality and timeliness of the court system. Mediation was delayed from with an anticipated Supreme Court trial scheduled to commence next financial year. A mediation process was entered into during the lead-up to the court appearance and a successful negotiated outcome was reached. A Deed of Settlement and Release was signed and the final compensation amount was agreed at $xxx. The balancing payment was received on DDMMYY.

The pandemic also limited your ability to search for a suitable replacement property. During local extended restrictions real estate activities effectively ceased.

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