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Edited version of private advice
Authorisation Number: 1052169071176
Date of advice: 9 October 2023
Ruling
Subject: Compulsory acquisition
Question
Does the sale of the Commercial Property (the Property) by Company A as Trustee for the Family Trust (You) to Government Department, meet the conditions contained in paragraph 124-70(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes. In the 2023 financial year, the Government Department notified you in writing that they wished to engage in negotiations with you, to purchase your Property under the strategic purchase scheme, allowing you to negotiate and sell your Property to the Government Department ahead of the formal resumption process. You commenced negotiations with the Government Department and signed the contract of sale for your Property disposing of your asset by agreement. You made a capital gain on the disposal of your Property to the Government Department.
Based on the information provided we consider that the conditions for compulsory acquisition contained in paragraph 124-70(1)(c) of the ITAA 1997 have been met and therefore, the replacement asset rollover under section 124-70 of the ITAA 1997 is available in relation to the disposal.
This ruling applies for the following period:
Year ending 30 June 2023
The scheme commenced on:
1 July 2022
Relevant facts and circumstances
You acquired the Property in the financial year ending 2008.
The Property falls in the proposed route of a Government Project.
You were issued a letter containing details of the proposed project.
You were later issued a letter advising that the strategic purchase is available for early acquisition of your Property because of the projects progress, the notice advised that:
(a) You were eligible to request an early acquisition of the Property, also called a strategic purchase.
(b) The strategic purchase option which you subsequently pursued, allowed impacted property owners to sell their property to the Government ahead of the formal resumption process.
(c) The Commercial Property Land has been gazetted for the intended use required by the Government for the Project, under section 242(1) of the Transport Infrastructure Act 1994.
Your Property encountered significant economic loss from loss of tenants since the Project was announced.
In the financial year ending 2023, the Government Department, indicated that the State may exercise it compulsory acquisition powers in order to acquire the land needed if an early purchase of the Property did not occur.
You successfully negotiated a contract of sale with the Government Department, and the Property settled in the financial year ending 2023.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subdivision 124-B
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 section 108-5
Income Tax Assessment Act 1997 paragraph 124-70(1)(c)
Income Tax Assessment Act 1997 subsection 124-75(3)
Income Tax Assessment Act 1997 subsection 995-1