Private ruling: Commissioner’s discretion
Date of advice: 22 May 2018
Published: July 2018
Ruling period: Year ended 30 June 201X | Year ended 30 June 201X | Year ended 30 June 201X
Date scheme commenced: 1 July 201X

Ruling: Q1: Will the Commissioner allow you further time under paragraph 124-75(3)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to acquire a replacement capital gains tax (CGT) asset? | A1: Yes.

Relevant facts and circumstances: You owned a commercial investment property. The property was compulsorily acquired by a government authority. You had the property valued and the offer of compensation was less than this amount. The compensation payment received is under a protracted legal dispute as you seek to get an increased amount of compensation. The compulsory acquisition roll-over in subdivision 124-B of the ITAA 1997 was applied to the capital gain.

Relevant legislative provisions: 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. If you receive money as a result of a compulsory acquisition or when a CGT asset is lost or destroyed, 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. This period may be extended in special circumstances as outlined in Taxation Determination TD 2000/40. In your case, you have been unable to purchase a replacement asset in the prescribed time due a protracted legal dispute with a state authority over the quantum of the compensation. On these facts, we would accept that there are special circumstances to allow further time to acquire a replacement asset.