Private ruling: CGT - rollover relief
Date of advice: 5 September 2022
Published: November 2022
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise their discretion pursuant to subsection 124-75(3) of the Income Tax Assessment Act 1997 (ITAA 97) and allow an extension of time beyond 30 June 2022 for a further 12 months up to 30 June 20XX after a settlement on the market value of the asset is made? | A1: Yes. | Q2: Will the same or similar purpose test in subsection 124-75(4) of the ITAA 97 apply in relation to the Property known as the Replacement Asset? | A2: Yes. | Q3: Will the same or similar purpose test in subsection 124-75(4) of the ITAA 97 be met if the Replacement Asset remains leased to third parties without future development? | A3: Yes.

Relevant facts and circumstances: The Trust is the registered proprietor of the Property. The Trust used the Property as a passive investment, by leasing land and a sales office on the land to third parties. The Property also gave the Trust future potential land development prospects and was to be held until such time it became suitable for those developments. An Authority compulsory acquired part of the Property. An offer was made to the Trust by the Authority for a compensation payment for market value of the land. The Trust is currently seeking expert and legal advice in relation to the quantum of the compensation payment. You are yet to lodge your claim for the compensation payment pursuant to the Land Acquisition and Compensation Act 1986. You purchased a replacement property known as the Replacement Asset. You will use the Replacement Asset as a passive investment leased to commercial or residential tenants, also providing potential future development prospects.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 124-75(3)

Reasons for decision: Summary: Yes, after taking into consideration that the Property was compulsory acquired and actions have been taken resulting in purchase a replacement asset, the Commissioner will allow an extension of time beyond two years up to 30 June 20XX or until a settlement on the market value of the asset has been made before that time. | Detailed Reasoning - Detailed reasoning: The two year time limit prescribed may be extended by the Commissioner in certain circumstances. In determining whether a longer period will be allowed, the Commissioner will consider a range of factors such as: • whether there is evidence of an acceptable explanation for the period of extension requested and whether it would be fair and equitable in the circumstances to provide such an extension; • whether there is any prejudice to the Commissioner if the additional time is allowed, however the mere absence of prejudice is not enough to justify the granting of an extension; • whether there is any unsettling of people, other than the Commissioner, or of established practices; • fairness to people in like positions and the wider public interest; • whether there is any mischief involved; and • the consequences of the decision. Furthermore Tax determination, TD 2000/40 Example 3, gives an example similar to your own circumstances. " 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 ." After taking into consideration, the Commissioner will allow an extension of time beyond two years to 30 June 2023 as per subsection 124-75(3) of the ITAA 1997. | Detailed Reasoning - Question 2: Will the same or similar purpose test in subsection 124-75(4) of the ITAA 97 apply in relation to the Property known the Replacement Asset. | Summary: Yes. Taxation Determination TD 2000/42 provides guidance as to whether an asset is used for a similar purpose. The determination states that whether an asset is used for the same or similar purposes as another asset is a question of fact and degree. The newly acquired Property will be used by the taxpayers as a passive investment leased to commercial or residential tenants. The new asset will be used for a similar purpose as the original asset and satisfies the "similar" purpose test under subsection 124-75(4) of the ITAA 1997. | Detailed Reasoning - Question 3: Will the same or similar purpose test in subsection 124-75(4) of the ITAA 97 be met if the Replacement Asset remains leased to third parties without future development? | Summary: Yes, as the trust was using the Property as a passive investment, by leasing the land sales office to third parties, and has not been developed prior to the compulsory acquisition, although also being held for potential future investment opportunities the Trust will still meet the "similar" purpose test under subsection 124-75(4) of the ITAA 1997 if the asset remains leased without future development.