Edited version of private advice

Authorisation Number: 1051955526112

Date of advice: 1 March 2022

Ruling

Subject: CGT - replacement asset rollover - compulsory acquisition

Question

Are you eligible to apply the replacement asset rollover relief under Subdivision of 124-B of the Income Tax Assessment Act 1997 (ITAA 1997) to the capital gain arising from the compulsory acquisition of the Property?

Answer

Yes. Your circumstances meet the conditions outlined under Subdivision 124-B of the ITAA 1997. Therefore, you are eligible to choose the replacement asset rollover as the Capital Gains Tax (CGT) asset, being the Property, was compulsorily acquired by an Australian government agency.

You will receive money for the compulsorily acquired Property and have undertaken activities in relation to acquiring a replacement asset/s to be used for the same or similar purpose as the Property.

The replacement asset roll-over allows you to defer the making of a capital gain or loss from one CGT event, being CGT event A1 when the Property is compulsorily acquired, until a later CGT event happens, such as a future sale.

This ruling applies for the following period:

Income year ending 30 June 20XX.

Income year ending 30June 20XX.

The scheme commences on:

1 July 20XX.

Relevant facts and circumstances

You and your spouse (Person A) jointly purchased a property (the Property), after 20 September 1985.

Person A transferred their ownership in the Property to you many years after the Property was acquired.

During the ruling period the Property had been used for the following purposes:

•         residence and associated recreational use

•         hobby farm; and

•         for storage purposes by Person A in relation to a company of which they were a director, for which there was no formal arrangement or rental paid.

The whole of the Property has been reserved for public purposes in the planning scheme of the local council (the Council) as part of their Public Acquisition Overlay (PAO) area.

A Government Department (the Department) had identified that the Property is located within several of their reserves and corridors in addition to being covered by the POA.

The Department indicated its intention to purchase the Property from you and that the POA prevented the unencumbered sale of the Property to any purchaser other than the State Government.

You engaged the services of a legal firm to assist you with this issue and the negotiations you entered in relation to the acquisition of the Property by the Department.

You accepted an offer made by the Department and entered a contract of sale for the Property, with settlement due to occur several months later on a specified date, or earlier by agreement.

You will make a capital gain on the disposal of your ownership interests in the Property.

You wish to buy a replacement property/ies for identical purposes that the Property had been used for.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 102-20

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 Subdivision 124-B