Private ruling: Compulsory acquisition
Published: December 2012
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Will the Commissioner exercise his discretion under paragraph 124-75(3)(b) of the Income Tax Assessment Act 1997 to allow further time for you to acquire a replacement asset? | A1: Yes.

Relevant facts and circumstances: The company operates as an investment company and holds numerous parcels of land and earns rent from some of these properties. A portion of land was compulsorily acquired by a government organisation. A dispute arose between the company and the government organisation in relation to the valuation of the land compulsorily acquired and therefore the compensation to be provided in respect of the compulsory acquisition. Due to the ongoing dispute, compensation has been received in instalments. The dispute has now been settled and the final payment has been made. Various assets have been acquired at or around the time compensation was received.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 124B, | Income Tax Assessment Act 1997 section 124-75, | Income Tax Assessment Act 1997 subsection 124-75(1), | Income Tax Assessment Act 1997 subsection 124-75(2), and | Income Tax Assessment Act 1997 124-75(3)(b).

Reasons for decision: Summary: Subdivision 124-B of the Income Tax Assessment Act 1997 (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), 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. Having regards to your full circumstances and the above principles, the Commissioner will allow an extension of time.

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