Private ruling: Discretional power under paragraph 124-75(3)(b) of the ITAA 1997
Date of advice: 20 November 2025
Published: 19 January 2026
Ruling period: DD MM YYYY to DD MM YYYY
Date scheme commenced: DD MM YYYY

Ruling: Q1: Will the Commissioner exercise the discretional power under paragraph 124-75(3)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the time period for the applicants to acquire a replacement asset to DD MM YYYY? | A1: Yes

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect, and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Background Information 1. The applicants acquired land, located at XXX (the Land) on DD MM YYYY. 2. The applicants are residents of Australia for taxation purposes. Acquisition by State Authority 3. On DD MM YYYY, the State Authority approached the applicants with an offer to purchase the Land. The applicants did not agree to sell and sought legal advice from a legal firm with an aim to understand and defend their rights. 4. On DD MM YYYY, the Taking Order ZZZ for the Land was registered at LLL. 5. On DD MM YYYY, the State Authority advised the applicants by a letter of the Taking Order ZZZ, that the Land was to be compulsorily acquired pursuant to Land Administration Act 1997 (LAA 1997). The Taking Order had provided an invitation to the applicants to make a claim for compensation. 6. On DD MM YYYY, further legal advice was sought, as well as an external valuation completed. The applicants were bound by a time limitation of x months post the registration of the Taking Order to make a claim for compensation. 7. Irrespective of the applicants' actions to defend their rights, should a compensation not be submitted within the time limitations, a clause in the LAA 1997 then provides that upon expiration of the time limitations, no proceedings were to be made against the acquiring authority for compensation. Claim for compensation 8. On DD MM YYYY, the applicants submitted their claim for compensation to the State Authority totaling $xyz plus interest; the original claim ('Claim 1'). 9. On DD MM YYYY, an updated claim ('Claim 2') was submitted (the only difference was the name listed in Claim 1 was corrected to the correct entity name). 10. On DD MM YYYY, the applicants were offered with a formal Compensation for an amount of $xyz, with a note that if they wished to reject the offer, the notification to that effect must have been forwarded within 60 days of the date of the letter of offer. 11. On DD MM YYYY, the applicants rejected the offer of compensation from the State Authority based on the substantial discrepancy between their submission of compensation and the formal offer by the State Authority. 12. On DD MM YYYY, the State Authority offered an Advanced Payment of compensation totalling $xyz, plus Interest on compensation to be paid at the rate of 6% (simple interest) calculated from the date of receipt of the claim, being DD MM YYYY (by the applicants) until the date of settlement. 13. The applicants were notified that the offer of an advance payment was made in accordance with section 248 of the LAA 1997 and does not prejudice their rights to take further action under the Act to have the quantum of any final amount of compensation payable to them determined independently. If they did not communicate their acceptance of the Advance payment to the State Authority within 30 days of the date of their letter, no interest was payable thereafter in respect of the amount offered. 14. On DD MM YYYY, the applicants' legal representative provided notice to the State Authority that the applicants have accepted the Advanced Payment ($xyz and interest), with the interest component being paid at some later stage once the dispute surrounding the date of entry has been resolved. The Legal Representative requested for a partial discharge of claim deeds on the terms discussed in the letter, whilst reserving their rights to dispute. 15. On DD MM YYYY, a Partial Discharge of Claim and Authority for execution by the claimant was sent from the State Solicitor's Office (SSO), who were acting for the State Authority. 16. On DD MM YYYY, the amounts of $xyz and $xyz were paid out of court into the applicants' respective bank accounts. 17. Negotiations were carried on for months between the applicants and the State Authority as the terms were not satisfactory. Legal negotiations between the parties 18. Between MM YYYY and MM YYYY, further legal negotiations of a Deed Poll took place between the applicants' legal representative and the State Authority's legal representative to negotiate amicable terms on the discharge of the Advanced Payment. No amicable terms were reached during this negotiation. 19. On DD MM YYYY, as no amicable terms were reached between the parties, the applicants and the State Authority, the State Authority unilaterally deposited the Advanced Payment of compensation ($xyz) with the Supreme Court of XX (Supreme Court). 20. The applicants were not in possession of the Advanced Payment irrespective of it being deposited to the Supreme Court. The applicants were required to submit claim to the Supreme Court to retrieve funds. 21. On DD MM YYYY, the applicants commenced their own application to the Supreme Court to retrieve the Advanced Payment of compensation totalling $xyz. 22. On DD MM YYYY, the applicants each received their share of Advance Payment in their respective bank accounts. 23. On DD MM YYYY, the applicants wrote to the State Authority requesting that interest be paid on the advance payment. 24. On DD MM YYYY, the State Authority provided an amended offer of compensation totalling $xyz as a further Advanced Payment plus interest. 25. On DD MM YYYY, the applicants formally rejected the updated offer of the State Authority. 26. On DD MM YYYY, the State Authority offered to make full balance of $xyz representative of an Advanced Payment + 6% interest per annum, calculated from DD MM YYYY (Taking Order) to the date of payment of the sum advanced. 27. On DD MM YYYY, as a result of the State Authority offering the Advanced Payment, the applicants were legislatively bound to accept the additional Advanced Payment. However, the applicants reserved their right to pursue the State Authority for the balance of funds due on the Taking in addition to outstanding interest payments. 28. Between MM YYYY and MM YYYY, the applicants and the State Authority remained in dispute over final balance of compensation due to the applicants' objections. During this period, correspondence was received by the applicants from the State Authority rejecting the applicants' claim for Interest Due, plus Principal, with disagreement focusing on the end date used in the calculation of Interest Due. 29. The State Authority offered the interest payment of $xyz based on an end date of DD MM YYYY, whilst the applicants had calculated $xyz. The applicants had accepted the State Authority's offer of $xyz as an Advanced Payment on Interest Due, whilst reserving their right. The applicants were bound by section 241 of the Land Administra ti on Act 1997 to accept the Advanced Payment on Interest Due, otherwise they would forgo their right to pursue the State Authority for the balance due on both Interest Due and Principal. 30. On DD MM YYYY, the applicants received $xyz as an Advanced Payment due on Interest Due. 31. On DD MM YYYY, Partial discharge of claim on amended offer of compensation was made. 32. On DD MM YYYY, the relevant share of the advance payment was received in the applicants' respective bank accounts of the advance payment of $xyz plus interest component. 33. Between MM YYYY and MM YYYY, the applicants continued to pursue interest payments due on the Advanced Payment of $xyz calculated from the start date of DD MM YYYY, being the date of registration of the Taking Order at LLL and the end date of DD MM YYYY, being the date which the Advanced Payment was paid into the Supreme Court. 34. On DD MM YYYY, the State Authority advised the applicants that it was prepared to pay $xyz representing interest on the advance payment for the period DD MM YYYY to DD MM YYYY. 35. The State Authority interest only offer at 6% calculated from DD MM YYYY (Taking Order) to DD MM YYYY (Acceptance of Advanced Payment) $xyz the State Authority states that they are not liable for any interest once the Advanced Payment was paid to the Court. 36. On DD MM YYYY, the applicants executed a Partial discharge of Claim form acknowledging the payment of the further interest on the advance payment. 37. On DD MM YYYY, the applicants received their respective share of the advance payment into their bank accounts. 38. On DD MM YYYY, the applicants received correspondence from the State Authority rejecting their claim for Interest Due with disagreement on the end date. The State Authority offered $xyz based on an end date of DD MM YYYY as the interest payment, whilst the applicants had calculated $xyz. 39. Between MM YYYY and MM YYYY, the applicants continued to search for a suitable replacement asset but were unsuccessful in their search for an asset and the legal matter was still ongoing. 40. Between MM YYYY and MM YYYY, Covid-19 was declared a global pandemic on DD MM YYYY. The economy faltered as Australia entered lockdown with a period of significant financial uncertainty. Business owners had been required to undertake radical changes to keep their businesses alive and relevant. The applicants were no different as they focused on retaining staff and surviving the pandemic. 41. In MM YYYY, the applicants appointed their legal practitioner XYZ to formally pursue outstanding Interest Due and the balance of compensation with the State Authority. Supreme Court dealings 42. On DD MM YYYY, a formal Writ of Summons was filed in the Supreme Court, representing the applicants' Statement of Claim. 43. On DD MM YYYY, the State Authority responded to the applicants' Writ of Summons filed in the Supreme Court. 44. On DD MM YYYY, the Plaintiff's response to the State Authority's Defence was filed in the Supreme Court. 45. Between MM YYYY and MM YYYY, there was continued interlocutory between both the Parties and the State Authority to pursue responses and discovery of documents. 46. In MM YYYY, the Parties filed with the Supreme Court the 'Affidavit Verifying List of Documents'. Documents and correspondences ranged from the date of the original Taking of the Land, planning matters, dispute over advance payment and interest due. 47. Between MM YYYY and MM YYYY, there was continued interlocutory by both the applicants and the State Authority with a view of mediation in Court. This included appointment of independent valuers and analysis of compensation discrepancy. 48. On DD MM YYYY, XYZ and the applicants' staff, along with the State Authority's legal representative being SSS attended mediation. Mediation was unsuccessful. 49. On DD MM YYYY, the Offer of Settlement was issued by SSS to the applicants for their consideration. In MM YYYY, the applicants did not accept the Offer of Settlement. 50. Between MM YYYY and MM YYYY, there was continued discovery of documents between both the applicants and the State Authority. Further, XYZ had issued subpoenas to the State Authority to supply further documents pursuant to the Court's order. 51. Between MM YYYY and MM YYYY, Court Orders were issued requesting various government departments to supply documents as a result of a discovery action by the applicants, to be received by DD MM YYYY. 52. Between MM YYYY and MM YYYY, there continued a discovery process by XYZ and SSS. 53. On DD MM YYYY, XYZ requested for further discovery of documents by SSS, outlining xx categories of documents that required further furnishment. 54. On DD MM YYYY, SSS wrote to XYZ acknowledging the request for further discovery. 55. Between MM YYYY and MM YYYY, SSS continued to supply documents for review by XYZ. 56. During MM YYYY, XYZ completed the discovery process for the applicants and provided comment to SSS, in respect to the xx categories of documents requested. XYZ further requested additional documents from SSS. 57. During MM YYYY, SSS's response to the above request was that SSS will not be supplying the additional documents until DD MM YYYY. 58. Between MM and MM YYYY, further discovery of documents was initiated by XYZ and SSS. 59. During MM YYYY, XYZ completed their discovery for the applicants and a selection of documents were then used for the appointment of an expert for the purposes of the valuation. 60. During the discovery process, it was alleged by the applicants that the land taking by the State Authority was not used for the lawful purpose of the statutory taking. 61. XYZ issued correspondence to the Minister for Lands enquiring whether the Minister will now confirm that he is satisfied that the interest in the Land is no longer required for the designation, and if so whether he will put in hand arrangements for the order spoken of in section 187(1) of the Land Administra ti on Act , that is, offer the land back to the applicants for purchase. 62. In MM YYYY, XYZ filed an amended Statement of Claim. 63. In MM YYYY, the applicants' legal representative, XYZ, received confirmation from the Minister of Lands Office that the Land had now been compulsorily acquired by another government body, being the Metropolitan Redevelopment Authority and therefore were unable to adequately respond to the applicants' request pursuant to section 187(1) of the Land Administra ti on Act . 64. Between MM YYYY and MM YYYY, pursuant to Court Order, the applicants and State Authority were to prepare expert opinions on the following matters: • civil engineering • town planning; and • land valuation. 65. On DD MM YYYY, a Planners Conferral took place between the applicants' Planner, and the State Authority's Planner. 66. On DD MM YYYY, XYZ lodged and filed a Planners Conferral Report. 67. Between MM YYYY and MM YYYY, pursuant to the Court Order, the applicants' valuation was required to be lodged with the Court by DD MM YYYY. 68. During MM YYYY, the applicants agreed that the hearing be adjourned to DD MM YYYY. 69. The applicants state that, although the Taking Order were originally issued in MM YYYY, they are now in their xth year of dispute over the final compensation payment and have entered into legal proceedings with a hope to resolve the ongoing issue. 70. The applicants have consistently pursued for a settlement, with many of the significant delays to date resting with third parties, under the control of the State Authority. 71. The applicants have focused their efforts in not only managing their operating business, but also handling the evolving nature of legal proceedings to seek the final due compensation required to source a replacement asset. 72. Despite the challenging nature of sourcing a replacement asset without a clear indication of total funds available, the applicants, in parallel with legal proceedings, have continuously searched for a replacement asset and are close to being able to finalise an acquisition within the near future. 73. The applicants are also committed to progressing with the necessary Court Orders to expeditiously finalise this compensation claim, which has become onerous for all parties involved.

Relevant legislative provisions: Income Tax Assessment Act 1997Subsection 104-10(6) | Income Tax Assessment Act 1997 Subdivision 124-B | Income Tax Assessment Act 1997 Subsection 124-70(1) | Income Tax Assessment Act 1997 Subsection 124-70(2) | Income Tax Assessment Act 1997 Subsection 124-75(3) | Income Tax Assessment Act 1997 Subsection 124-75(4) | Income Tax Assessment Act 1997 Subsection 124-75(5) | Income Tax Assessment Act 1997 Subsection 124-75(6) | Income Tax Assessment Act 1997 Subsection 995-1(1) Further issues for you to consider | Not applicable.

Reasons for decision: Summary: All legislative references are to the Income Tax Assessment Act 1997 ('ITAA 1997') unless otherwise stated. The Commissioner will exercise the discretion under paragraph 124-75(3)(b) of the Income Tax Assessment Act 1997 to extend the time period for the applicants to acquire a replacement asset until DD MM YYYY. | Detailed Reasoning - DETAILED REASONING: 80. Roll-over relief for the compulsory acquisition of a CGT asset is available where the conditions outlined in Subdivision 124-B of the ITAA 1997 are met. 81. Under subsection 124-70(1) of the ITAA 1997, an entity may be able to choose a replacement asset rollover if a CGT asset owned by the entity is compulsorily acquired by an Australian government agency as per paragraph 124-70(1)(a) of the ITAA 1997. 82. A replacement-asset rollover allows you, in special cases, to defer the making of a capital gain or loss from one CGT event until a later CGT event happens. 83. Subsection 995-1(1) of the ITAA 1997 defines an Australian government agency as a Commonwealth, a State or a Territory, or an authority of Commonwealth or of a State or Territory. 84. A further requirement is that the owner of the original asset must receive money or another CGT asset or both, for the CGT event to be eligible for a rollover (subsection 124-70(2) of the ITAA 1997). On satisfying these conditions, section 124-75 of the ITAA 1997 provides other requirements which must be satisfied if money is received for the event happening. 85. Subsection 124-75(2) of the ITAA 1997 requires that the owner of the asset must incur expenditure in acquiring another CGT asset. Subsection 124-75(3) of ITAA 1997 requires the entity to incur some of that expenditure either one year before or one year after the end of the income year in which the event happens, or within such further time as the Commissioner allows in special circumstances. 86. Subsection 124-75(4) of the ITAA 1997 requires that the replacement asset acquired must be used for the same or similar purpose as the taxpayer used the original asset. This replacement asset cannot become an item of trading stock just after the acquisition or be a depreciating asset (subsection 124-75(5) of ITAA 1997), nor become a "registered emissions unit" just after the acquisition (subsection 124-75(6) of ITAA 1997). 87. In determining whether special circumstances exist for the Commissioner to extend the period in which to acquire a replacement asset, Taxation DeterminationTD 2000/40 Income tax: capital gains: what are 'special circumstances' for the purposes of subsection 124-75(3) of the ITAA 1997? (TD 2000/40) provides guidance on interpreting subsection 124-75(3) of the ITAA 1997, in particular, what are 'special circumstances'. 88. TD 2000/40 states that the expression 'special circumstances' by its nature is incapable of a precise or exhaustive definition. What constitutes 'special circumstances' depends on the facts of each particular case. 89. Example 3 in TD 2000/40 provides an illustration in which a taxpayer's asset is compulsorily acquired by a state authority. The taxpayer is then involved in a protracted legal dispute with the authority over the quantum of the compensation. In that instance, the Commissioner accepts that there are special circumstances to allow further time for the taxpayer. 90. In determining whether the discretion will be exercised, the Commissioner also considers the following factors: • there should be evidence of an acceptable explanation for the period of the extension requested and that it would be fair and equitable in the circumstances to provide such an extension; • account must be had to any prejudice to the Commissioner which may result from the additional time being allowed, however the mere absence of prejudice is not enough to justify the granting of an extension; • account must be had of any unsettling of people, other than the Commissioner, or of established practices; • there must be a consideration of fairness to people in like positions and the wider public interest; • whether there is any mischief involved; and a consideration of the consequences. | Detailed Reasoning - APPLICATION TO YOUR CIRCUMSTANCES: 91. The Land was compulsorily acquired by the State Authority on DD MM YYYY. The State Authority advised the applicants by a letter of the Taking Order XXX that the Land was to be compulsorily acquired pursuant to the Land Administration Act 1997 (LAA 1997). 92. In the applicants' case, the State Authority compulsorily acquired the Land on DD MM YYYY. The applicants received compensation payments, including the interest from the compulsory acquisition, however the applicants disputed the compensation amount and the interest amounts. 93. The applicants sought legal advice and submitted their claim for compensation, totalling an amount of $xyz, which was rejected by the State Authority after comparing it with the formal offer by them. Negotiations commenced to resolve the compensation payout. 94. The applicants officially commenced legal proceedings, and a formal writ of Summons was filed in the Supreme Court to lodge their Statement off Claim on DD MM YYYY. 95. The dispute is still ongoing with their legal representative issuing subpoenas to the State Authority. Currently, the applicants' legal team is in the process of dealing with discovery. The legal team have received a large tranche of documents from the local government departments via subpoena, and they are negotiating with SSS on further discovery from the State Authority. They are planning to finalise and moving to list the matter to trial if the conclusions of the experts are that there is sufficient value over and above the advance payment to warrant taking the matter to a hearing. 96. The compensation amount is still in dispute and the applicants cannot ascertain the amount of money they could potentially apply towards the replacement asset. The applicants remain committed to investing in a replacement asset and, as such, request an extension of time until DD MM YYYY. 97. The applicants did not acquire a replacement asset prior to the disposal of the Land therefore to satisfy subsection 124-75(3), they must incur at least some of the expenditure in acquiring another CGT asset no later than DD MM YYYY, (being one year after the end of the income year in which the event happened), or within such further time as the Commissioner allows in special circumstances (paragraph 124-75(3)(b)). 98. There are no legislative provisions which provide guidance as to what may constitute special circumstances for the purposes of subsection 124-75(3). The matter depends on the facts of each case. 99. 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? (TD 2002/40) explains that the expression special circumstances in the context of subsection 124-75(3) by its nature is incapable of a precise or exhaustive definition. 100. TD 2000/40's Example 3 provides an illustration in which a taxpayer's asset is compulsorily acquired by a state authority. The taxpayer is then involved in a protracted legal dispute with the authority over the quantum of the compensation. Example 3 of TD 2000/40 is relevant to the applicants' circumstances. There were delays caused by the legal dispute with the State Authority over the quantum of the compensation, and therefore they failed to meet the requirements to acquire the replacement CGT asset. 101. As determination of the final compensation value is critical to acquire a replacement asset, their situation falls within the scope of what would be considered special circumstances, therefore the Commissioner will exercise his discretion under paragraph 124-75(3)(b) to allow an extension of time until DD MM YYYY for the applicants to acquire a replacement CGT asset. 102. Based on these facts, it is deemed that special circumstances do exist to warrant the Commissioner to exercise his discretion and allow an extension of time to obtain a replacement asset, as it would be fair and equitable to do so, given that the circumstances represent an acceptable explanation for the delay. 103. Also, by granting this extension of time to acquire replacement asset: • there does not appear to be any prejudice to the Commissioner or any other parties; • there is no unsettling of people or of established practices; • there does not appear to be any mischief involved in this case; and • the Commissioner considers it to be fair to people in like positions and the wider public interest. 104. Therefore, the Commissioner will exercise the discretion under paragraph 124-75(3)(b) of the ITAA 1997 to allow an extension of time to obtain a replacement asset for the Land that were compulsorily acquired by the State Authority, until DD MM YYYY. | Detailed Reasoning - CONCLUSION: The Commissioner will exercise the discretion under paragraph 124-75(3)(b) of the Income Tax Assessment Act 1997 to extend the time period for the applicants to acquire a replacement asset until DD MM YYYY.

Previous Private Rulings: 74. On DD MM YYYY, the applicants submitted an application for a private ruling to the Commissioner of Taxation seeking an extension of time in which to acquire the replacement asset. Authorising number xxx was issued, granting the applicants time to obtain a replacement asset by DD MM YYYY. | 75. On DD MM YYYY, the applicants were granted a further extension to their private ruling application to obtain a replacement asset by DD MM YYYY (Authorisation number xxx). | 76. On DD MM YYYY, the applicants were granted a further extension to their private ruling application to obtain a replacement asset by DD MM YYYY (Authorisation number xxx). | 77. On DD MM YYYY, the applicants were granted an extension to their private ruling application to obtain a replacement asset by DD MM YYYY (Authorisation number xxx). | Information provided: 78. You have provided a number of documents containing detailed information in relation to the applicants' application including: | • Private Binding Ruling ('PBR') Application, dated DD MM YYYY | • Responses to request for further information, dated DD MM YYYY | 79. We have referred to the relevant information within these documents in applying the relevant tests to your circumstances.