Edited version of private advice

Authorisation Number: 1052102903335

Date of advice: 29 March 2023

Ruling

Subject: Extension of time for incurring expenditure to acquire a replacement asset

Question

Will the Commissioner exercise his discretion in subsection 124-75(3) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time for you to acquire a replacement asset from the proceeds received pursuant to the compulsory acquisition of your asset to meet the eligibility requirements for a roll-over under Subdivision 124-B of the ITAA 1997?

Answer

Yes.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

1.            You acquired the Property prior to XX Month 19XX. You used the Property in a partnership for a business.

2.            The Property was compulsorily acquired.

3.            You previously obtained a private ruling in which the Commissioner exercised his discretion to extend the time allowed to acquire a replacement asset.

4.            In that private ruling, the Commissioner allowed an extension of time to acquire a replacement asset due to a protracted legal dispute as to the quantum of compensation, which was not received until 20XX.

5.            After the private ruling issued, you have suffered significant health complications, creating difficulties in searching for a replacement asset.

6.            Prior to the onset of these health issues, you sought multiple properties in. One offer was made but the property was subsequently withdrawn from market. The onset of the health issues has resulted in an inability to devote suitable time to researching and obtaining a replacement asset.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 124-B

Income Tax Assessment Act 1997 subsection 124-75(3)

Income Tax Assessment Act 1997 paragraph 124-75(3)(b)

Reasons for decision

All references made in these reasons for decision are to the ITAA 1997unless otherwise stated.

Question

Will the Commissioner exercise his discretion in subsection 124-75(3) and allow an extension of time for you to acquire a replacement asset from the proceeds received pursuant to the compulsory acquisition of your asset to meet the eligibility requirements for a roll-over under Subdivision 124-B?

Summary

The Commissioner will exercise his discretion in subsection 124-75(3) and allow the extension of time, since your situation falls within scope of what would be considered special circumstances in TD 2000/40.

Detailed reasoning

1.            Subsection 124-75(3) requires you to incur some of the expenditure either one year before or one year after the end of the income year in which the event happens or within such further time as the Commissioner allows in special circumstances.

2.            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? (TD 2000/40) explains that the expression special circumstances in the context of subsection 124-75(3) by its nature is incapable of a precise or exhaustive definition.

3.            Some examples of special circumstances are provided in TD 2000/40, including Example 3 in paragraph 6, which is similar to the reasoning your original extension of time was given:

Graeme had a commercial property compulsorily acquired by a State authority. Graeme is having a protracted legal dispute with the authority over the quantum of the compensation. On these facts, we would accept that there are special circumstances to allow further time.

4.            The Commissioner has previously exercised his discretion to extend the time allowed for you to incur that expenditure until 30 June 20XX.

5.            After private ruling decision issued, you have suffered significant health issues which have impacted on your ability to acquire a suitable replacement property. The examples of circumstances where an extension of time can be accepted in TD 2000/40 do not contemplate significant health issues, however the reasoning still applies.

6.            Your situation falls within scope of what would be considered special circumstances. Hence, the Commissioner will exercise his discretion under paragraph 124-75(3)(b) to allow an extension of time until 30 June 20XX for you to incur some of the expenditure to acquire a replacement CGT asset.