Private ruling: Income tax - replacement asset rollover
Date of advice: 22 December 2020
Published: March 2021
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 20XX

Ruling: Q1: Will the Commissioner allow a further period of time to incur expenditure on the replacement assets under paragraph 40-356(3)(b) of the Income Tax Assessment Act 1997 ? | A1: Yes. As there are delays out of the taxpayer's control, and circumstances leading to extended construction time which is preventing the replacement of the asset within the required time, the Commissioner will grant a further period of time until 30 June 20XX.

Relevant facts and circumstances: The company operates a business. On XX March 20XX, a major fire resulted in the destruction of the buildings in the facility, including all plant and equipment installed and/or stored in these buildings. To date, the final payout negotiation with the insurer has yet to be finalised. The construction of the new buildings can only commence after the settlement of the final insurance payout and the acquisition of the replacement plant and equipment can only occur after the construction of the new buildings are completed. It is anticipated that the construction of the new buildings and the required fit-out will take up to X years. In addition, the demolition process (i.e. removal of remaining burnt structures etc) was also delayed due to asbestos issues. As such, the acquisition of the replacement plant and equipment is likely to occur during the year ending 30 June 20XX with the circumstances and delays all being beyond the company's control.

Relevant legislative provisions: Income Tax Assessment Act 1997 subdivision 40-D