ATO ID 2004/123: Capital gains tax: time of acquisition of poker machine rights
Date of decision: 24 December 2003
Year of income: Year ended 30 June 2003
Business line: Private Groups and High Wealth Individuals

Issue
Did the taxpayer, a hotelier, acquire poker machine rights for the purposes of section 160U of the Income Tax Assessment Act 1936 (ITAA 1936) at the time they were granted in 1997 under the Liquor Act 1982 (NSW) (LA 1982)?

Decision
Yes. The taxpayer acquired the poker machine rights for the purposes of section 160U of the ITAA 1936 at the time they were granted in 1997 under the LA 1982.

Facts
The taxpayer, a hotelier, was granted poker machine rights under the LA 1982 in 1997. The rights were not acquired pursuant to a contract. The LA 1982 was replaced by the Gaming Machines Act 2001 (NSW) (GMA 2001). The taxpayer's rights under the LA 1982 were carried over to the GMA 2001 as poker machine entitlements. The taxpayer sold the poker machine entitlements in 2003.

Reasons for decision
Summary: Legal rights fall within the definition of 'CGT asset' at subsection 108-5(1) of the Income Tax Assessment Act 1997 . This is consistent with the position under paragraph 160A(a) of the ITAA 1936. Poker machine rights are therefore CGT assets. The rights pertaining to each approved poker machine, kept in a hotel, for which a poker machine entitlement was allocated, were effectively carried over from the LA 1982 to the GMA 2001. This was facilitated by paragraph 15(1)(a) and the savings provisions in Schedule 1 of the GMA 2001. The poker machine rights created in 1997 under the LA 1982 were covered by subsection 160M(6) of the ITAA 1936 because they were not a form of corporeal property and vested in the taxpayer on their creation. Under paragraph 160M(6B)(a) of the ITAA 1936, the taxpayer acquired those rights at the time applicable under subparagraph 160U(6)(b)(i) of the ITAA 1936. As a result of the interaction between subparagraph 160U(6)(b)(i) and paragraph 160M(6)(b) of the ITAA 1936, the time that the poker machine rights were acquired was the time at which they were granted to the taxpayer in 1997 under the LA 1982.

Legislative references: Income Tax Assessment Act 1997 subsection 108-5(1)
Related ATO interpretative decisions: ATO ID 2003/46
Subject references: Capital gains tax Acquisition of CGT assets Amusement & gambling equipment CGT asset construction & creation CGT assets Statutory licences