Private ruling: CGT - compulsory acquisition rollover
Date of advice: 19 October 2023
Published: 27 November 2023
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 2023

Ruling: Q1: Does the replacement asset rollover provision in Subdivision 124-B of the Income Tax Assessment Act 1997 (ITAA 1997)for compulsory acquisitions apply to the disposal of the Unit? | A1: Yes. Your circumstances meet the conditions outlined in paragraph 124-70(1)(c) of the ITAA 1997. Therefore, you are eligible to choose the replacement asset rollover in relation to the capital gains tax (CGT) asset. The replacement asset roll-over allows you to defer the making of a capital gain or loss from one CGT event, being CGT event A1 when the property is disposed of, until a later CGT event happens. You will receive money for the compulsorily acquired property. Under subsection 124-75(2) of the ITAA 1997, the owner of the asset must incur expenditure in acquiring another CGT asset. In accordance with paragraph 124-75(3)(a) of the ITAA 1997, at least some of the expenditure must be incurred no earlier than one year before the event happens, or under paragraph 124-75(3)(b) of the ITAA 1997, no later than 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. Further information on involuntary disposals of CGT assets can be found on our website ato.gov.au and entering Quick Code QC 66017 into the search bar at the top right of the page.

Relevant facts and circumstances: You are a resident for Australian tax purposes. You are the registered proprietors of a strata unit (the Unit) and hold the property as joint tenants. The Unit has not been used by you as a main residence and has been used exclusively to derive rental income throughout the period of ownership. The Developer sought to acquire two adjoining blocks which included the Unit. You dissented to a sale to the Developer at which point the Developer commenced action to compulsorily acquire the Unit under the state legislation having secured the required level of support. You executed a Call Option Deed with the Developer to purchase the Unit for the agreed purchase price.

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