Private ruling: Taxable Australian real property
Date of advice: 16 April 2020
Published: June 2020
Ruling period: Income year ending 30 June 20XX | Income year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can a foreign resident disregard any capital gain made from the sale of water allocation rights? | A1: Yes. Having considered the circumstances and the relevant factors the Commissioner considers that the sale of water rights, such as licences and water allocations, are capital gains tax (CGT) assets. The permanent trade of a water right is a disposal of a CGT asset. Water rights are not taxable Australian real property under Subdivision 855 of the Income Tax Assessment Act 1997. A person who is a foreign resident, just before the CGT event happens, may disregard a capital gain or capital loss from a CGT event if the event happens in relation to a CGT asset that is not taxable Australian real property. Further information can be found by searching 'QC 42314 on ato.gov.au

Relevant facts and circumstances: The taxpayer is a foreign resident for income tax purposes The property was acquired prior to 1985 Water allocation rights were separated from the land some XX years ago Water allocation rights are a CGT asset Water allocation rights are not taxable Australian real property The taxpayer a percentage of the asset The taxpayer has not carried on a business in Australian The water allocation right was disposed of The water allocation proceeds were $XXX,XXX

Relevant legislative provisions: Income Tax Assessment Act 1997 section 855-10 | Income Tax Assessment Act 1997 section 855-15 | Income Tax Assessment Act 1997 section 855-20