Private ruling: Commissioner's discretion - extension of time - compulsory acquisition
Date of advice: 18 November 2025
Published: 5 January 2026
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: DD MM 20XX

Ruling: Q1: Can you apply the roll-over under Subdivision 124-B of the Income Tax Assessment Act 1997 (ITAA 1997) to disregard the capital gain that would otherwise arise upon the compulsory acquisition of your property? | A1: Declined to rule. | Q2: Will the Commissioner exercise the discretion under paragraph 124-75(3)(b) of the ITAA 1997 to allow an extension of time to acquire a replacement asset? | A2: Yes . | Q3: Obtaining a private ruling to resolve the matter for the affected income taxation years with certainty. | A3: Invalid question. | Q4: Does the active asset test apply to the residual compensation proceeds for small business CGT concession eligibility and, if applicable, how is the active asset status assessed, considering the involuntary disposal and corporate trustee structure? | A4: Declined to rule.

Relevant facts and circumstances: Company A is the corporate trustee for Trust A. Individual A is the sole director and shareholder of Company A. Company A acquired a property (the Property) in its capacity as trustee of Trust A. Individual A used the Property to conduct their business. From acquisition, the Property was used both as an office for Company A as well as Individual A's practice. Company A received a letter from an Australian Government agency advising you of the commencement of the acquisition of the Property. The letter stated the Australian Government agency's intention to acquire the Property for a project. The letter invited Company A to provide the Australian Government agency with information around your business operation and outlined the acquisition process. The Australian Government agency made a combined compensation offer to Company A for its freehold interest in the land as well as the lease interest held by Individual A. A notice was published in the relevant State Government Gazette. The Gazette confirmed that the Australian Government agency had compulsorily acquired the Property on this date. After the acquisition, Company A submitted an appeal application to the Land and Environment Court of your relevant state. The appeal argued that the compensation offers made by the Australian Government agency were insufficient and that their assessment should have taken into account the actual replacement value of retail spaces located in the same locality. Individual A joined the proceedings as a party on behalf of the lease interest in the Property. At this time, Company A formally became the holder of the part of the compensation representing the lease interest in the Property in trust for Individual A, pending the outcome of the proceedings. The Court made its order in MM 20XX, which was an unfavourable outcome for you. You have advised that you have lodged a Notice of Appeal and that proceedings are now before the relevant Court of Appeal. Individual A has been self-representing throughout the legal proceedings. Some of the compensation proceeds from the compulsory acquisition were used by Company A to fund expenses related to the legal proceedings. You are currently waiting for the outcome of the legal proceedings before you can acquire a replacement asset. You have advised that once the Court has made their determination and the quantum of the compensation is identified, you will be able to look for a suitable replacement asset.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 124 | Income Tax Assessment Act 1997 Subdivision 124-B | Income Tax Assessment Act 1997 subsection 124-75 | Income Tax Assessment Act 1997 subsection 124-75(3) | Income Tax Assessment Act 1997 paragraph 124-75(3)(b) | Taxation Administration Act 1953 paragraph 357-110(1)(a) of Schedule 1 | Taxation Administration Act 1953 subsection 359-35(2)(a) of Schedule 1

Reasons for decision: Summary: The Commissioner has declined to rule on this question on the basis of assumptions about future events. | Detailed Reasoning - Detailed reasoning: We will not make a private ruling in relation to Question 1 of your request about your eligibility for the roll-over under Subdivision 124-B of the ITAA 1997. This is because we consider the accuracy of your ruling would depend on the following assumptions: • expenditure is incurred on a replacement asset; • the timing of the expenditure that is incurred; and • the replacement asset is used for the same purpose as, or for a similar purpose to, the purpose for which you used the original asset. The Commissioner considers that the correctness of your ruling in relation to the roll-over under subdivision 124-B of the ITAA 1997 would depend on making assumptions about future events in circumstances where such assumptions would be speculative and unreliable. The Commissioner is not prepared to make a ruling for this question on the basis of assumptions about future events and therefore is declining to rule on this matter under paragraph 357-110(1)(a) of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953). | Summary: The Commissioner considers that it would be reasonable to give you further time to search for a replacement asset. | Detailed Reasoning - Extending the replacement asset period: The requirements for a roll-over where you received money are contained under section 124-75 of the ITAA 1997. If you receive money for the CGT event happening, you can choose to obtain a roll-over if you incur expenditure in acquiring another CGT asset. The timeframe for acquiring a replacement asset is set out under subsection 124-75(3) of the ITAA 1997. You must incur expenditure in acquiring another CGT asset no earlier than one year before the disposal happens and 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. There are guidelines on when the Commissioner will extend the replacement asset period and special circumstances which are set out in 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 2000/40). TD 2000/40 provides that what is considered 'special circumstances' depends on the facts of each particular case. The following example is provided in TD 2000/40 to illustrate when the Commissioner would exercise the discretion under subsection 124-75(3) of the ITAA 1997: Example 3: Graeme had a commercial property compulsorily acquired by a State authority. Graeme is having a protracted legal dispute with the authority over the quantum of the compensation. On these facts, we would accept that there are special circumstances to allow further time. | Detailed Reasoning - Application to your circumstances: The Property was compulsorily acquired. You have not acquired a replacement asset for the Property and the replacement asset period has elapsed. You are unlikely to acquire a replacement asset until after the completion of the legal proceedings and payment of the final compensation amount. We accept that your situation is similar to Example 3 of TD 2000/40. The Commissioner considers that it would be reasonable to give you further time to search for a replacement asset. The Commissioner accepts that the determination relates to the quantum of compensation you will receive and that knowing this quantum is essential to the acquisition of a suitable replacement asset. | Summary: The Commissioner is unable to answer this question as it is not a valid question that we can rule on. | Detailed Reasoning - Detailed reasoning: Your request for a private ruling about obtaining a private ruling is not valid, as advised in our earlier letter. This is because your request is about a topic on which we are not able to make a private ruling and your request is not in the approved form. As we can only make a private ruling in response to a valid question, we are unable to answer your question. | Summary: The Commissioner has declined to rule on this question on that the request relates to a scheme that is only hypothetical or speculative. | Detailed Reasoning - Detailed reasoning: We will not make a private ruling in relation to your question on the active asset test. We are declining to give you a private ruling pursuant to subsection 359-35(2)(a) of the TAA 1953 which provides that a private ruling does not have to be given if making the ruling would prejudice or unduly restrict the administration of a taxation law. This includes where the scheme, to which the application relates is not seriously contemplated or is hypothetical. Paragraph 39 of TR 2006/11 provides examples where the making the ruling would prejudice or unduly restrict the administration of a taxation law. One example is where the application is frivolous or vexatious or not seriously contemplated (such as a request where the scheme is merely hypothetical). Based on the information provided, you are requesting a ruling on the way a tax law applies or would apply in relation to a hypothetical scenario. The Commissioner is not prepared to make a ruling for this question and therefore is declining to rule on this matter under subsection 359-35(2)(a) of Schedule 1 to the TAA 1953.