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Edited version of private advice

Authorisation Number: 1051845784304

Date of advice: 29 May 2021

Ruling

Subject: Extension of the replacement asset period to apply to a compulsory acquired asset

Question

Will the Commissioner exercise his discretion under section 124-75(3)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of time until DD MM YYY to acquire a replacement asset?

Answer

Yes. Subsection 124-75(3)(b) of the ITAA 1997 requires you to incur expenditure in acquiring a replacement CGT asset no later than one year after the CGT event or within such further time as the Commissioner allows in special circumstances. Based on the facts and circumstances of your case the Commissioner will exercise the discretion to allow an extension of time until DD MM YY to purchase a replacement asset.

This ruling applies for the following periods:

Financial Year ending DD MM YYY

The scheme commences on:

DD MM YYY

Relevant facts and circumstances

You owned a commercial property which was compulsory acquired.

The compulsory acquisition of the commercial property was settled and a CGT Event (A1) pursuant to section 104-10 of the ITAA 1997 occurred and resulted in a capital gain.

Within the replacement asset period, you identified two replacement assets:

1.    Property 1, and

2.    Property 2.

Within the replacement asset period, you successfully acquired Property 1. The contract of purchase for Property 2 fell through.

You applied for a private ruling requesting an extension of the replacement asset period.

You were issued a Notice of Decision (Authorisation number: XXXXXXXXXXXXX) granting an extension of the replacement asset period.

Since you were issued a Notice of Decision, you have experienced considerable difficulty in identifying and acquiring a replacement asset due to the impact of COVID-19 on the real property market, specifically regarding the national lockdowns, decrease in property listings and an increase in the purchase price due in turn to the lack of supply.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 104-10

Income Tax Assessment Act 1997 Section 124-70

Income Tax Assessment Act 1997 Section 124-75

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