Private ruling: Capital gains tax - disposal
Published: July 2013
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2012

Ruling: Q1: Will the capital gain made on the disposal of property originally acquired under leasehold be disregarded? | A1: Yes

Relevant facts and circumstances: You acquired land by way of crown lease prior to 20 September 1985. You applied to purchase this land many years later. The land was converted to freehold title upon receipt of payment.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20, | Income Tax Assessment Act 1997 Section 104-10, | Income Tax Assessment Act 1997 Subsection 104-10(5) and | Income Tax Assessment Act 1997 Subsection 124-10(2).

Reasons for decision: Summary: Section 102-20 of the Income Tax Assessment Act 1997 provides that you can make a capital gain or loss if and only if a CGT event occurs. The most common CGT event, CGT event A1, occurs when you dispose of a CGT asset to someone else, for example, if you sell a property. When a Crown Lease is converted to a freehold title, a CGT event will occur. You dispose of a right (the Crown Lease) and acquire a new right (the freehold title) as a replacement asset. On the conversion of a Crown Lease to a freehold title, replacement asset rollover in accordance with subdivision 124-J of the ITAA 1997 will occur. The rollover is automatic and any capital gain or capital loss made from the original asset is disregarded (subsection 124-10(2) of the ITAA 1997). In this case, as the freehold title on the land was acquired as a result of replacement asset rollover, the date of acquisition of the freehold is taken to have been acquired on the date you acquired the lease (subsection 124-10(4) of the ITAA 1997). Upon sale of your interest in the freehold lease, CGT event A1 will occur (section 104-10 of the ITAA 1997). However, as you are taken to have acquired your freehold lease prior to 20 September 1985, any capital gain or capital loss made on the disposal will be disregarded (subsection 104-10(5) of the ITAA 1997).