Edited version of private advice

Authorisation Number: 1051895001283

Date of advice: 12 October 2021

Ruling

Subject: CGT - compulsory acquisition of main residence

Question 1

Is the capital gain or capital loss you made from the compulsory acquisition of your main residence disregarded for tax purposes?

Answer

Yes. The property is a pre-CGT asset and exempt from any capital gains tax obligations as the asset was acquired by you before 20 September 1985. A capital gain or capital loss you make on disposal is disregarded in accordance with paragraph 104-10(5)(a) of the Income Tax Assessment Act 1997 (ITAA 1997). The timing of the CGT event is listed in subsection 104-10(6).

Note: You may be able to choose a roll-over if an asset is compulsorily acquired: see Subdivision 124-B of the ITAA 1997 for the condition for retention of the pre-CGT status of the replacement asset. Roll-over is not automatic and must meet certain conditions.

This ruling applies for the following period:

For the income year ended 30 June 20XX

The scheme commenced on:

DDMM20XX

Relevant facts and circumstances

You and your spouse purchase a block of land in 19XX and built your family home as your main residence.

You have not completed any other major renovations or capital improvements to the property since the capital gains tax (CGT) laws applied from 20 September 1985.

The total land area of the property is X hectares (X acres).

You have never used the property to produce assessable income or conduct business activities.

On DDMM20YY you entered into an agreement with the relevant state government entity who compulsorily acquired the property for government use and you received monetary compensation to the amount of $X.

You have since purchased another main residence to live in as a replacement asset.

Relevant legislative provisions

Income Tax Assessment Act 1997 paragraph 104-10(5)(a)

Income Tax Assessment Act 1997 Subdivision 124-B