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Edited version of private advice
Authorisation Number: 1052133597589
Date of advice: 7 July 2023
Ruling
Subject: CGT compulsory acquisition
Question
Does the replacement asset rollover provision in paragraph 124-70 (1) (c) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the disposal of a residential unit by you to XYZ Pty Ltd?
Answer
Yes. Your circumstances meet the conditions outlined in paragraph 124-70 (1) (c) of the ITAA 1997. Therefore, you are eligible to choose the replacement asset rollover as the capital gains tax (CGT) asset. You will receive money for the compulsorily acquired 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 disposed of, until a later CGT event happens, such as a future sale.
Under subsection 124-75(2) of the ITAA 1997, the owner of the asset must incur expenditure in acquiring another CGT asset. In accordance with paragraph 124-75(3)(a) of the ITAA 1997, at least some of the expenditure must be incurred no earlier than one year before the event happens, or under paragraph 124-75(3)(b) of the ITAA 1997, no later than 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.
This private ruling applies for the following period:
Year ending 20XX
Year ending 20XX
The scheme commenced on:
1 July 2020
Relevant facts and circumstances
You are the registered proprietor of a residential unit.
You are a foreign resident for Australian taxation purposes.
You do not currently occupy the unit as your principal place of residence.
In 20XX you were approached by a developer to acquire your property for the purposes of a larger development.
By 20XX, the developer had entered into contracts with all owners except you. This gave the developer the right to invoke state legislation to compulsorily acquire your property. The developer provided you with notice that if you did not sell, they intended to compulsorily acquire your property by the lawful exercise of the State Act.
Relevant legislative provisions
Section 124-70 - Income Tax Assessment Act 1997 (ITAA 97)
Section 124-75 ITAA 97