Private ruling: IT/CGT – compulsory acquisition – replacement asset rollover – extension of time
Date of advice: 16 April 2019
Published: June 2019
Ruling period: Year ending 30 June 201F | Year ending 30 June 201G
Date scheme commenced: Mid 200A

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 the Rulees a further extension of time until the requested date to obtain a replacement asset for an asset that has been compulsorily acquired by a government body? | A1: Yes

Relevant facts and circumstances: The Rulees acquired the Land after 20 September 1985. A government authority issued the Rulees a Specific Order that the Land was to be compulsorily acquired (the Taking) under the Land Administration Act 1997 (the LLA). The Specific Order was registered and the government authority became the registered owner of the Land. Since the Taking, the Rulees have been subject to detailed protracted legal negotiations in respect of compensation for the Land. The legal negotiations are continuing with a view of finalising the matter as soon as possible.

Relevant legislative provisions: Section 124-70 Income Tax Assessment Act 1997 | Section 124-75 Income Tax Assessment Act 1997 | Subsection 124-75(3) Income Tax Assessment Act 1997 | Paragraph 124-75(3)(b) Income Tax Assessment Act 1997

Reasons for decision: Summary: Under sections 124-70 and 124-75 of the Income Tax Assessment Act 1997 (ITAA 1997), if you receive money as compensation for an Australian government agency compulsorily acquiring your CGT asset, you can choose a rollover if you incur expenditure in acquiring another CGT asset: ● 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. Subsection 124-75(3) of the ITAA 1997 provides the Commissioner discretion to allow further time for acquiring the replacement CGT asset in special circumstances. The term ‘special circumstances’ is not defined for the purposes of the ITAA 1997. 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? explains that whether special circumstances exist depends on the facts of each particular case and provides examples, including the following: 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. The circumstances of the Rulees are similar to the above example in that they are engaged in a protracted legal dispute over the quantum of compensation to be paid for the compulsory acquisition of the Land. We consider the Rulees circumstances are ‘special circumstances’. The Commissioner will therefore allow the Rulees further time until the requested date to acquire another asset to replace the Land.