Issue
Can a taxpayer choose not to apply the roll-over in section 124-575 of the Income Tax Assessment Act 1997 (ITAA 1997) if the taxpayer holds a Crown lease over land and the lease expires and a new one is granted?
Decision
No. The replacement asset roll-over in section 124-575 of the ITAA 1997 applies automatically.
Facts
The taxpayer owned a Crown lease over land (the original lease).
On expiry of the original lease, the taxpayer exercised their right to renew the lease on the same terms for a further period. The new lease is over precisely the same land as the original lease.
The taxpayer sought to crystallise a capital loss on expiry of the original lease.
Reasons for Decision
Subdivision 124-J of the ITAA 1997 provides for replacement asset roll-over for the holder of rights under a Crown lease over land when the lease is renewed, extended or converted to an estate in fee simple.
Subsection 124-575(1) of the ITAA 1997 says there is a roll-over in this situation. The roll-over is automatic. It does not involve a choice by the taxpayer.
Roll-over means that any capital gain or capital loss made on the expiry of the original lease is disregarded (subsection 124-15(2) of the ITAA 1997). Essentially the gain or loss is deferred until the expiry of the new lease.
Accordingly, the capital loss made by the taxpayer on expiry of the original lease is disregarded. The taxpayer cannot choose to have regard to the loss at this time.