Private ruling: Capital gains tax and replacement-asset roll-overs
Date of advice: 18 September 2020
Published: November 2020
Ruling period: Income year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Does the sale of the Land meet the conditions contained in paragraph 124-70(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. The local council (the Council) notified you that they wished to engage in negotiations with you to purchase part of your property, being the Land. In a separate letter a representative of the Council confirmed that if the negotiations were not successful that actions would have been undertaken by the Council to compulsorily acquire the Land. You signed the contract for the sale of the Land and made a capital gain on the disposal of your ownership interest in the Land. Based on the information provided we consider that the conditions for compulsory acquisition contained in paragraph 124-70(1)(c) of the ITAA 1997 have been met.

Relevant facts and circumstances: You, being Persons A and B, purchased a property (the Property). After several years you were approached by the Council in relation to the acquisition of part of the Property (the Land). You engaged the services of legal representatives in relation to this matter who engaged in correspondence with the Council in relation to this matter. The Council notified you on various occasions advising that they wished to enter voluntary negotiations with you in relation to the acquisition of the Land and that the Land was to be acquired in relation to the Council's development plan for the area the Property was located. Your legal representative sought clarification from the Council in relation to if they were prepared to provide a letter to support that if the negotiations in relation to the Council's acquisition of the Land had not been successful that it would have compulsorily acquired the Land under a power conferred to it by an Australian law. The Council sent you a letter confirming that if the Land could not be purchased by the Council by private negotiations, a resolution of the Council would have been sought to authorise the compulsory acquisition of the Property to achieve the objectives of the Council's development plans in relation to the proposed purpose for which the Land was required. You entered into a contract for the sale of the Land for $X, receiving a deposit and instalment payments at specified dates. The transfer of the title of the Land occurred during the period covered by this ruling. You made a capital gain on the disposal of your ownership interest in the Land and intend making the choice to utilise the roll-over contained in Subdivision 124-B of the ITAA 1997.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20 | Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Subdivision 124-B | Income Tax Assessment Act 1997 Paragraph 124-70(1)(c)