Private ruling: Capital gains tax
Published: March 2014
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to apply the rollover in section 124-70 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.

Relevant facts and circumstances: The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are: • the application for private ruling, and • the documents provided in response to the requests for further information. You acquired a property prior to 20 September 1985. The local council had advised that it intended to rezone the land for residential use. You acquired the property for the purpose of investment and either property development or resale when the rezoning occurred. As a result, you were no longer able to hold the land for your original purpose. You understood, from this process, that your land would be resumed at some time in the future however you were unsure when this would occur. Therefore you began preparing an application for hardship to the local council. The local council accepted your request and compulsorily acquired the land in the relevant financial year. You have been offered an amount of money as compensation. You have not purchased a replacement asset at this stage.

Relevant legislative provisions: Income Tax Assessment Act 1997 subdivision 124-B | Income Tax Assessment Act 1997 subsection 124-75(3)

Reasons for decision: Summary: Subdivision 124-B of the ITAA 1997 explains the circumstances when a rollover is available for an asset that is compulsorily acquired, lost or destroyed. You are able to choose the rollover when an asset you own is compulsorily acquired by an Australian government agency or acquired under a power of compulsory acquisition conferred by an Australian law. 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) of the ITAA 1997, 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. If you acquired the original asset before 20 September 1985 and you incurred expenditure in acquiring another CGT asset, you are taken to have acquired the other asset before that day if the expenditure is not more than 120% of the market value of the original asset when the event happened. Application to your circumstances In this case you held land that was acquired before 20 September 1985. As a result of the local council rezoning the land, you understood that it would be resumed at some point. You submitted an application for hardship which the council accepted. Your land was compulsorily acquired in the relevant financial year. You received monetary compensation from the council in relation to the compulsory acquisition. As the land was compulsorily acquired by the local council, you are entitled to choose the rollover in subdivision 124-B of the ITAA 1997. The fact that you submitted an application for hardship does not change your eligibility for the rollover. As you received monetary compensation, you are required to incur expenditure in acquiring another CGT asset within one year after the end of the income year in which the event happened.