Private ruling: Compulsory acquisition - extension of time to acquire a replacement asset
Published: December 2013
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Will the Commissioner exercise his discretion under subsection 124-75(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to further extend the time required to obtain a replacement asset? | A1: Yes.

Relevant facts and circumstances: You were the sole owner of a number of properties. Your ownership of these properties ended due to compulsory acquisition by a government authority. You believed that the amount of compensation received was insufficient. Ongoing negotiations and court proceedings relating to the quantum of compensation you received lasted for a number of years. A settlement was reached and you received the final settlement payment. Since receiving the final settlement, you have signed a contract to acquire a replacement asset. However, you will need to acquire an additional replacement asset.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 124-B | Income Tax Assessment Act 1997 Subsection 124-75(3)

Reasons for decision: Summary: Subdivision 124-B of the ITAA 1997 explains the circumstances when a rollover is available for an 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. This period may be extended in special circumstances as outlined in the following example in Taxation Determination TD 2000/40: Graeme had a commercial property compulsorily acquired by a State authority. Graeme is having a protracted legal dispute with the authority over the quantum of the compensation. On these facts, we would accept that there are special circumstances to allow further time. Your case is similar to the example provided in TD 2000/40 in that there was an ongoing legal dispute over the quantum of compensation you received. Taking your full circumstances and the above principles into account, the Commissioner will allow an extension of time.