Edited version of private advice

Authorisation Number: 1052331171487

Date of advice: 12 November 2024

Ruling

Subject: Commissioner's discretion - replacement asset

Question 1

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 to 31 December 20XX to acquire a replacement asset?

Answer

Yes. The Commissioner will exercise the discretion under paragraph 124-75(3)(b) of the ITAA 1997 to extend the period for acquiring a replacement asset to 31 December 20XX. The Commissioner considers that under the special circumstances it is fair and equitable given that the Taxpayers:

•         have an ongoing legal dispute over the compensation amount has delayed settlement and provided uncertainty regarding the final compensation amount, and

•         purchase replacement property, however until the final compensation amount is determined, the amount of additional expenditure required to satisfy the rollover requirements is unable to be determined.

This ruling applies for the following period

Income year ended 30 June 20XX

The scheme commenced on: XX April 20XX

Relevant facts and circumstances

The Taxpayers are married, and in July 20XX purchased land, as tenants in common (the Property).

The Property is a total of XXXX sqm, and has been used for share-farm arrangements, and since 20XX as the Taxpayers' main residence.

The Local Council issued a Notice of Compulsory Acquisition (the Notice) for part the Property under the Local Government Act 2020 (Vic) in accordance with section 22 of the Land Acquisition and Compensation Act 1986 (Vic). The Property vested in the Local Council when the Notice was published in the Victorian Government Gazette on XX XXXX 20XX.

Under the Notice, an initial offer of compensation was made to the Taxpayers.

The Taxpayers and the Local Council are engaged in an ongoing legal dispute over the compensation amount.

The Taxpayers obtained an independent valuation of the compulsorily acquired land to assist in resolving the dispute, and submitted a response to the offer made by the Local Council claiming the sum of $XXXXXX.

In 2024, the Local Council, in response, made two revised offers of compensation.

The Taxpayers rejected the offers and filed legal proceedings.

The Taxpayers have not signed a final deed of settlement.

It is the Taxpayers' intention to apply the settlement proceeds to the acquisition of suitable replacement land and apply the CGT roll-over provided for in Subdivision 124-B of the ITAA 1997.

In 20XX, the Taxpayers acquired one replacement property.

The Taxpayers have tried to resolve the dispute with the Local Council, with the main issue being the amount of compensation, which will change the proceeds for the capital gains.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 104-10(2)

Income Tax Assessment Act 1997 subsection 104-10(6)

Income Tax Assessment Act 1997 Subdivision 124-B

Income Tax Assessment Act 1997 section 124-70

Income Tax Assessment Act 1997 paragraph 124-70(1)(a)

Income Tax Assessment Act 1997 subsection 124-70(2)

Income Tax Assessment Act 1997 subsection 124-75(2)

Income Tax Assessment Act 1997 subsection 124-75(3)

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

Income Tax Assessment Act 1997 subsection 124-75(4)