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Edited version of private advice
Authorisation Number: 1052123508747
Date of advice: 16 June 2023
Ruling
Subject: Extension of time - involuntary disposal
Question
Will the Commissioner exercise his discretion under paragraph 40-365(3)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow further time to incur expenditure or replacement assets?
Answer
Yes. Having considered your circumstances and the relevant factors, the Commissioner is able to apply his discretion under section 40-365 of the ITAA 1997 and allow an extension of time.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The Company operated a business from its principal place of business.
A large fire destroyed the premises including the factory, office buildings, sheds, tanks and other infrastructure, plant and equipment.
The Company had property insurance and third-party liability insurance.
Insurance proceeds were paid to the Company in respect of the property loss and this was received in interim payments throughout several financial years.
Following the fire, the Company continued to trade in a limited capacity from another location during a prolonged insurance settlement and redevelopment.
A third party was appointed to design and undertake the redevelopment.
The redevelopment involved a multi-stage, multi-faceted program which was expected to take several years to complete.
Due to the significance of the redevelopment and the staged manner in which it was undertaken, replacement assets were acquired across the life of the project.
A critical item of plant was ordered from a company located overseas.
The Company was unable to finish the rebuild and went into liquidation.
A third party was appointed Joint and Several Administrators of the Company and subsequently Joint and Several Liquidators of the Company.
At the time of the external administrators' appointment the item of Plant had yet to be fully commissioned.
An employee of the supplier of the Plant travelled to Australia to commence the installation process.
The Company sold its business and business assets whilst in administration.
The Company anticipates it had taxable income due to insurance proceeds and seeks to apply a balancing adjustment offset with an extension of time to acquire replacement assets.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 40-365