Private ruling: CGT - replacement asset rollover
Date of advice: 17 February 2022
Published: May 2022
Ruling period: Income year ending 30 June 20XX | Income year ending 30 June 20XX | Income year ending 30 June 20XX
Date scheme commenced: 1 July 20XX.

Ruling: Q1: Will the Commissioner exercise his discretion under paragraph 124-75(3)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow until 30 June 20XX for expenditure to be incurred in relation to acquiring a replacement asset? | A1: Yes. The Commissioner will exercise his discretion under paragraph 124-75(3)(b) of the ITAA 1997 to allow you until 30 June 20XX to incur expenditure to acquire an asset to replace the destroyed house in accordance with the guidance provided in Taxation Determination TD 2000/40.

Relevant facts and circumstances: You own a rental property (the Property). A fire occurred in the house located on the Property. The Property is insured, and you lodged an insurance claim. The insurer assessed the house as being a write off and agreed to settle your insurance claim with a cash settlement. You received the cash settlement amount shortly after the insurer had assessed the Property. You are going to use the cash settlement amount to acquire a replacement asset. At this point you are not sure of whether you are going to build a new house on the Property or purchase another property, but have undertaken the following in relation to acquiring a replacement asset: • making enquires with builders in relation to constructing a new house on the Property. The current waiting time for builders is more than twelve months, with an increase in building costs and delays in the supply chain of building and related products. Additionally, appropriate approvals will need to be obtained from the local council in relation to constructing a replacement house, which can be time consuming; and • monitoring the real estate market, making unsuccessful bids on several properties on which you were outbid by significant amounts. The current property market is confident with strong demand for properties and high sale prices being achieved. You anticipate you will need to contribute additional funds to the cash settlement amount in any endeavour to acquire another property given the strength of the market.

Relevant legislative provisions: Income Tax Assessment Act 1997 Paragraph 124-75(3)(b)