Edited version of private advice

Authorisation Number: 1052196787749

Date of advice: 7 December 2023

Ruling

Subject: CGT- extension of time

Question

Will the Commissioner exercise the discretion under paragraph 124-75(3)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of time, until 30 June 20YY, for you to acquire a replacement asset?

Answer

Yes. You made several attempts to obtain a replacement asset and due to circumstances outside of your control these attempts have been unsuccessful, therefore the Commissioner will exercise his discretion under paragraph 124-75(3)(b) of the ITAA 1997 to allow you an extension of time to 30 June 20YY to acquire a replacement asset for your asset that was compulsorily acquired by a government body.

This ruling applies for the following period:

Year Ending 30 June 20YY

The scheme commenced on:

1 July 2020

Relevant facts and circumstances

The taxpayers owned the property.

The property was used for mixed-use commercial purposes before the compulsory acquisition. The property was the sole source of income for the taxpayers.

The taxpayers would run a business of renting out the commercial property and would be actively involved in the day-to-day maintenance of the property and the negotiation of the rent.

The property was compulsorily acquired by the NSW government agency in the 20YY-YY financial year.

A month after the compulsory acquisition a translation of the compensation determination was provided to the taxpayers.

Key handover for the property was arranged 2 months after compulsory acquisition.

However, the taxpayers did not receive any compensation amount until 6 months after compulsory acquisition. The property served as the taxpayers only source of income. The taxpayers were unable to acquire a replacement asset without funding or the ability to raise more debt to purchase the property.

The taxpayers have been actively looking for a replacement since the compulsory acquisition date. However, have experienced considerable difficulty in identifying suitable replacement assets to date due to the unpredictable nature of COVID-19, it has caused fluctuations in the property prices and availability.

The taxpayers had identified a number of properties; however, after lengthy negotiations, they all failed to proceed to sale.

One of the taxpayers suffers a severe medical condition and the other taxpayer needs to take care of their partner, and the taxpayers are in another country to consult medical professionals on the conditions to do further investigative medical tests. Hence this special circumstance gives extra complexity for them to acquire the property within one year.

A previous accountant for the taxpayers gave misleading taxation advice in asserting that there is a capital gain tax exemption if they purchased a property or signed a purchase contract in the financial year ending 20YY.

Relevant legislative provisions

Income Tax Assessment Act 1997 subdivision 124-B

Income Tax Assessment Act 1997 subdivision 124-70