Private ruling: Extension of time to defer the capital gain on a compulsorily acquired capital gains tax asset
Date of advice: 7 October 2020
Published: November 2020
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 an extension of time until 30 June 20XX for you to acquire a replacement asset? | A1: Yes. Subsection 124-75(3)(b) of the ITAA 1997 required you to incur expenditure in acquiring a replacement CGT asset by 30 June 20XX 'or within such further time as the Commissioner allows in special circumstances'. Based on the facts and circumstances of your case, and the guidance provided in Taxation Determination TD 2000/40 Income tax: capital gains: what are 'special circumstances' for the purposes of subsection 124-75(3) of the Income Tax Assessment Act 1997?, the Commissioner will exercise his discretion to allow an extension of time until 30 June 20XX.

Relevant facts and circumstances: You, owned a commercial property (the Property) in City X. The Property was compulsorily acquired by a State Government Department. You received a Taking of Land Notice for the Property and entered negotiations before receiving the first compensation for the compulsorily acquisition shortly after. The compulsory acquisition of the property, a CGT event A1 pursuant to section 104-10 of the ITAA 1997, resulted in a capital gain. You are seeking to defer the capital gain by applying a roll-over under subdivision 124 B of the ITAA 1997 on the basis that you will acquire a qualifying replacement property (in order to satisfy requirements of section 124-75 of the ITAA 1997). You have engaged a variety of real estate agents and considered a number of properties as potential replacements, however for various reason these properties were considered unsuitable. You have provided in your submission that the required replacement property price range has somewhat limited supply. Additionally, the replacement property search has been affected by restrictions and market factors related to the COVID pandemic.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 124-70 | Income Tax Assessment Act 1997 Section 124-75