Private ruling: date of CGT event
Published: January 2012
Ruling period: Year ending 30 June 2010 | Year ending 30 June 2001
Date scheme commenced: 1 July 2000

Ruling: Q1: When did the capital gain event occur, at the time of the resumption of the land or at the time of payment of the final determined amount of compensation? | A1: At the time of resumption.

Relevant facts and circumstances: You inherited a farming property post CGT. The state resumed part of the land to extend the road net work around 10 years ago. From that time, you have not had the use of the land as it has been used by the state for the road network. You have now reached an agreement in relation to the compensation for the resumption of the land. The resumption monies were agreed to and received in the 2010 year and the title to the resumed area of land did not change until after that time. The land is part of the overall parcel of property that is farmed on a day-to-day basis by you and your wife. You operate a farming partnership. At all times since the acquisition of the farm, that partnership has farmed the property. For the last 10 years you have not been able to farm on that area that has been resumed by the state. The state did not pay any rent or lease monies to you during the time they used the resumed area. It is anticipated that the farm as it now stands will continue into the foreseeable future and hopefully will remain within the family. You have provided copies of documentation relating to the resumption of the land by the state government including the Gazette which notifies the date of resumption.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 170 | Income Tax Assessment Act 1936 section 170(10AA) | Income Tax Assessment Act 1997 subsection 104-10(2) | Income Tax Assessment Act 1997 paragraph 104-10(2)(a) | Income Tax Assessment Act 1997 paragraph 104-10(2)(b) | Income Tax Assessment Act 1997 subsection 104-10(6) | Income Tax Assessment Act 1997 subsection 960-100(1)

Reasons for decision: Summary: The date of the CGT event is the resumption date. | Detailed Reasoning - Detailed reasoning: CGT event A1 happens when a taxpayer disposes of a CGT asset. A taxpayer disposes of a CGT asset when a change of ownership occurs from them to another entity, whether by some act or event or by operation of law (subsection 104-10(2) of the ITAA 1997). However, a change of ownership does not occur: · if the taxpayer stops being the legal owner of the asset but continue to be its beneficial owner; or · merely because of a change of trustee. In the present case, the property was forfeited under a State law. There has been a change of ownership from the taxpayer to the State by operation of law. The State is an entity for the purposes of the ITAA 1997 (see subsection 960-100(1) of the ITAA 1997). Consequently, CGT event A1 happened to the property. As the property was compulsorily acquired by an entity under a power conferred by a State law, the time of the disposal is determined by subsection 104-10(6) of the ITAA 1997. The time of disposal will be the earlier of: · when the taxpayer received compensation from the entity; or · when the entity becomes the asset's owner or · when the entity entered it under that power or · when the entity took possession under that power. Section 170 of the ITAA 1936 provides the statutory time limits for the amendment of assessments by the Commissioner. However, section 170(10AA) of the ITAA 1936 provides that nothing in section170 shall prevent the amendment, at any time, of an assessment for the purpose of giving effect to section 104-10(6) of the ITAA 1997. In your case, the state government compulsorily acquired the land as a result of the publication of a Gazette notice. This is when CGT event A1 happened.

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