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Income tax: where a taxpayer receives a combination of cash and a replacement asset as compensation for the compulsory acquisition of of a portion of land he or she used in carrying on a business, and incurs expenditure in constructing a building on the remaining land for use in that business, is rollover relief available under both section 160ZZK and section 160ZZL of the Income Tax Assessment Act 1936 ?

Preamble

Yes. Rollover relief is available to each part of the resumed land. Section 160ZZK is available to the portion of land for which a replacement asset is acquired, and section 160ZZL is available to the remaining portion where a replacement asset is received as compensation.

The original asset for the purposes of both section 160ZZK and section 160ZZL is capable of being two separate parts of the resumed land.

The building is a replacement asset for the reasons given in TD TD 93/D99.

As explained in TD TD 93/D100, section 160ZZL does not require a replacement asset to be of the same nature as, or used for a similar purpose to, the original asset. Notes: (i) Where the original asset is acquired on or after 20 September 1985 the market value of the replacement asset must exceed the amount that would have been the indexed cost base of the resumed portion of land. (ii) The building must be acquired not earlier than one year before the compulsory acquisition and not later than one year after the end of the year of income in which the compulsory acquisition took place ( or within such further period as the Commissioner in special circumstances allows ). (iii) If the land was acquired before 20 September 1985, for the building to be deemed to have been acquired before that date, the cost of constructing the building must not exceed 120% of the market value of the portion of land compulsorily acquired. (iv) The taxpayer must make an election that both section 160ZZK and section 160ZZL are to apply. (v) The replacement assets are not trading stock.

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