Private ruling: Compulsory acquisition rollover
Date of advice: 28 May 2018
Published: August 2018
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is a replacement asset rollover available under section 124-70 of the Income Tax Assessment Act 1997 (ITAA 1997) on the disposal of your rental property to a Government agency? | A1: Yes.

Relevant facts and circumstances: You purchased 2 properties. The properties were compulsory acquired and you received a cash settlement. You acquired a replacement property within 12 months of the compulsory acquisition. All properties are used for rental purposes.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 124-70 | Income Tax Assessment Act 1997 section 124-75 | Income Tax Assessment Act 1997 section 124-85

Reasons for decision: Summary: Subsection 124-70(1) of the ITAA 1997 provides that you may be able to choose a roll-over if a CGT asset you own is compulsorily acquired by an Australian government agency and you receive compensation for the event happening. An Australian government agency is defined to include states and authorities of the states. The rollover allows you to rollover any capital gain or loss that you make as a result of the acquisition if you acquire a replacement asset. If the original asset was used in your business, than the replacement asset must also be used in your business. Alternatively, if the asset was not used in your business, you must use the asset for the same or similar purpose to the purpose for which the original asset was used. According to section 124-75 of the ITAA 1997 if you receive money as compensation, you must incur expenditure in acquiring another CGT asset no earlier than one year before the event happens or no later than one year after the end of the income year in which the event happens. In your case, your asset was compulsorily acquired by an Australian government agency and you received money as compensation for the acquisition. You have used the money received to acquire a replacement CGT asset within one year after the disposal event and the asset is being used for a same or similar purpose. As a result, you are entitled to choose a replacement asset rollover under section 124-70 of the ITAA 1997.