Edited version of private advice

Authorisation Number: 1052267134814

Date of advice: 8 July 2024

Ruling

Subject: CGT - compulsory acquisition - extension of time

Question

Will the Commissioner exercise their discretion pursuant to paragraph 124-75(3)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of time, until 30 June 2025, for the trust to acquire replacement assets?

Answer

Yes.

This ruling applies for the following period:

30 June 2025

The scheme commenced on:

1 July 2022

Relevant facts and circumstances

The trust acquired the property 20XX.

In 20XX, a contract for the compulsory acquisition of the property was made with State AA Government, Department of Transport and Main Roads (TMR), and the property settled.

After the sale of the original property the trust looked at several properties to purchase.

The trust however was unsuccessful in acquiring any of the properties due to various reasons, such as not proceeding at the first feasibility analysis, or submitting an expression of interest which was not accepted. One contract was officially signed but terminated because of problems found in due diligence process.

The trust chose the replacement asset rollover in their 2023 tax return.

The trust has requested until 30 June 2025 to find a replacement asset.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 124-B

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

Reasons for decision

Subdivision 124-B of the ITAA 1997 explains the circumstances when a rollover is available for a CGT asset that is compulsorily acquired, lost or destroyed.

If you receive money as a result of the compulsory acquisition, you can only choose a rollover if you incur expenditure in acquiring another CGT asset. Under subsection 124-75(3) of the ITAA 1997, you must incur at least some of the expenditure no earlier than one year before the event happens or, within one year after the end of the income year in which the event happens, or a longer time allowed by the Commissioner.

In determining whether to allow an extended asset replacement period, the Commissioner considers the following factors:

•         whether there is evidence of an acceptable explanation for the period of extension requested and whether it would be fair and equitable in the circumstances to provide such an extension

•         whether there is any prejudice to the Commissioner if the additional time is allowed (however, the mere absence of prejudice is not enough to justify the granting of an extension)

•         whether there is any unsettling of people, other than the Commissioner, or of established practices

•         the need to ensure fairness to people in like positions and the wider public interest

•         whether there is mischief involved, and

•         the consequences of the decision.

In this case the trust has looked at a number of properties, but they have either been unsuitable at the first feasibility analysis, the trust didn't get the deal or there were issues with the property.

Accordingly, the Commissioner has considered your facts and circumstances will exercise the discretion under paragraph 124-75(3)(b) of the ITAA 1997 and extend the period for you to acquire replacement assets to 30 June 2025.