Private ruling: Capital gains tax
Date of advice: 21 November 2018
Published: February 2019
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a capital gains tax roll over for your investment property? | A1: No. | Q2: Can your capital gain be disregarded under the capital gains tax provisions? | A2: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 124-B | Income Tax Assessment Act 1997 section 124-70 | Income Tax Assessment Act 1997 section 124-75

Reasons for decision: Summary: Subdivision 124-B of the Income Tax Assessment Act 1997 (ITAA 1997) explains the circumstances when a replacement asset rollover is available for an asset that is compulsorily acquired, lost or destroyed. It involves your ownership of one capital gains tax (CGT) asset ending and you acquiring another one. Section 124-70 of the ITAA 1997 lists the events that may give rise to a roll-over. Under paragraph 124-70(1)(aa) of the ITAA 1997 you may be able to choose a roll-over if a CGT asset you own is compulsorily acquired by an entity (other than an Australian government agency or a foreign government agency) under a power of compulsory acquisition conferred by a law covered under subsection (1A). Subsection 124-70 (1A) of the ITAA 1997 states that a law is covered under this subsection if it is (a) an Australian law (other than Chapter 6A of the Corporations Act 2001 , which covers compulsory acquisitions and buyouts). In your case, you independently sold your investment property to avoid being placed into bankruptcy. The sale of your property is not a compulsory acquisition within the meaning provided in section 124-70 of the ITAA 1997. Furthermore section 124-75 of the ITAA 1997 requires you to incur expenditure in acquiring another CGT asset within the required timeframe in order to choose a roll-over. There is no indication that this will occur in your circumstances. Therefore you are unable to choose a roll-over under Division 124 of the ITAA 1997. The capital gain made cannot be disregarded under any other provision.

Relevant facts: You were a Director of a company that became insolvent. Being a Director, you were held liable for the company debts. | To pay off these debts you were given two choices. Either they force you into bankruptcy and seize all assets of yours, your relations and have the trustee manage your affairs or sell you assets with equity to make good the bank’s shortfalls. | You chose the second option to sell your assets and render proceeds to the bank. | As part of the Deed, you were to release all profit from the sales of your assets plus enter into an additional payment arrangement. | You are currently honouring that payment arrangement. The sale of your assets took place in the 20XX-XX income year. | You have made a capital gain from the sale of your investment property, however all the profit from the sale went directly to the bank on settlement.