Private ruling: compulsory acquisition
Published: May 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Will the Commissioner exercise his discretion under paragraph 124-75(3)(b) of the Income Tax Assessment Act 1997 to allow a further 12 months for you to acquire a replacement property? | A1: Yes.

Relevant facts and circumstances: You and your spouse owned an investment property. It was resumed by way of compulsory acquisition. The contracts were exchanged in the 2011-12 financial year. You and your spouse have attempted to replace the investment property within the 12 month period permitted in these circumstances. You and your spouse are currently in negotiations for the purchase of a property. However, these are progressing slowly and are unlikely to be completed by the end of the 2011-12 financial year.

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

Reasons for decision: Summary: According to the Guide to capital gains tax 2010-11 , if your capital gains tax (CGT) asset is compulsorily acquired, a rollover to defer the capital gain may be available. 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. 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 Taxation Determination TD 2000/40. If you embark on a process to do what is reasonable to acquire a replacement asset, an extension of time may be granted. Having regards to your full circumstances and the above principles, the Commissioner will allow an extension of time until 30 June 2013.

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