Edited version of private advice

Authorisation Number: 1052332677611

Date of advice: 21 November 2024

Ruling

Subject: Rollover - relief - extension of time

Question 1

Will the Commissioner exercise the discretion under section 124-75(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow further time until 30 June 2025 to acquire a replacement asset?

Answer

Yes, having considered your circumstances and the relevant factors, the Commissioner will use the available discretion to grant you further time to acquire a replacement asset. The partnership has tried to look for a replacement asset but due to ill health of one of the partners they have been unable to acquire it. The partnership has until 30 June 2025 to incur expenditure in acquiring another CGT asset.

Question 2

Will the purchase of a residential investment property meet the requirements of same or similar use in section 124-75(4) of the ITAA 1997?

Answer

Yes. If the partnership buys a replacement property that is an investment property to replace its compulsory acquired investment property and the replacement property is not a private property such as a main residence, for the purposes of Subdivision 124-B of ITAA1997, this replacement asset situation would fall within the scope of the same or similar purpose test. As the replacement property will be used for the same/similar purpose (i.e., to derive rental/investment income) the partnership will satisfy 124-75(4).

This ruling applies for the following period:

Year Ending 30 June 2025

The scheme commenced on:

1 July 2020

Relevant facts and circumstances

Person A and person B are partners (the partners) in a partnership (the partnership).

The partnership owned a mixed commercial/residential property (the property).

In November 20XX, the partnership was issued with a notice confirming the intended compulsorily acquiring of the property for the purposes of a state government project.

In February 20XX, the partnership entered into a Contract of Sale for the sale of the property.

Settlement took place in February 202XX.

From the time of compulsory acquisition of the property, the partners have actively sought to acquire a replacement asset with the sale proceeds.

For the period April 20XX to September 20XX, the partners pursued opportunities of interest.

Lockdown due to COVID-19 occurred for the period June 2021 to October 2021.

For the period October 20XX to May 20XX, the partners continued to receive information about and review available property but were consumed while providing pharmaceutical services. They had a shortage of staff, and the partners were also concerned with becoming ill with COVID-19.

In May 20XX, person A suffered from a medical condition.

Person A's recovery was expected to take approximately twelve months.

Person B the pharmacist and is very busy with the pharmacy which takes up a considerable amount of their time. Person A, the partner more interested in the property market, who liaised with the sellers.

The partners prefer to purchase property by seeing it in person and meeting the agents. They like to become familiar with the location of the property, and complete a thorough due diligence.

Due to the impacts of COVID-19 the partners have faced difficulties in finding a suitable replacement asset by 30 June 2022. The ability to find a suitable replacement asset has now been hampered by Person A's medical condition and their recovery period.

In September 2022, the Commissioner granted an extension to 30 June 2024 to incur expenditure on a replacement asset.

Since the original application in June 2022, Person A suffered further ill health and medical complications requiring further medical treatment in 2023 and 2024 whilst attempting to review available replacement asset investment properties by 30 June 2024.

The partners were unable to incur expenditure on a replacement asset by 30 June 2024.

The partnership is considering purchasing a residential investment property due to rising property prices and limited available commercial property.

The replacement property is not for private use.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 124-B

Income Tax Assessment Act 1997 section 124-70

Income Tax Assessment Act 1997 section 124-75