No capital gains tax for properties in natural disaster land swap programs

The Assistant Treasurer has announced any property owners with investment properties involved in the Lockyer Valley Regional Council's land swap program will be eligible for capital gains tax (CGT) relief.

This measure allows taxpayers to choose a CGT exemption when they participate in an Australian Government agency program that provides replacement assets to taxpayers affected by a natural disaster, like the one being run by Lockyer Valley Regional Council.

Taxpayers will also be able to attain pre-CGT status on their replacement asset so they are not disadvantaged in tax terms if they participate in this type of program.

A CGT exemption will also apply to rights arising under a cash grant program for taxpayers affected by a natural disaster (whether the program is run by an Australian Government agency or another entity).

Taxpayers whose main residence is accidentally destroyed will be able to access the main residence exemption to the extent they would have been able to had their main residence not been destroyed. The exemption will apply where they choose to rebuild the dwelling and then sell the land or dwelling or both without establishing the new dwelling (and its adjacent land) as their main residence. This will apply to all accidental destructions regardless of whether the destruction results from a natural disaster.

This measure applies generally to CGT events happening on or after 1 July 2011.

Media release

For more information see media Release no. 137 issued by the Assistant Treasury and Minister for Financial Services and Superannuation on 9 October 2011.

Administrative treatment The ATO will accept tax returns as lodged during the period up until the day the law is passed by Parliament. Assessments will not be reviewed until the outcome of the proposed amendment is known. When the new law is enacted taxpayers will need to review their positions: Those taxpayers who choose to anticipate the changes and who anticipate them correctly will not need to do anything more. If a taxpayer anticipates the changes incorrectly, they will need to seek an amendment of their earlier assessment. If a taxpayer acted reasonably in anticipating this change, there will be no tax shortfall penalty and, if they actively seek to amend their return within a reasonable time, we will remit the GIC attributable to the amendment to nil. Otherwise the full GIC will run from the date the change becomes law. Those taxpayers who lodge tax returns in accordance with the current law should seek an amendment of their assessment once the measure is passed. If a reduction in liability results, the ATO will pay interest on any overpayment.

More information For more information refer to the following: proposal paper - Minor amendments to the capital gains tax law (PDF 164 KB) page 8 was released on 27th June 2012 discussion paper - Capital gains tax relief for taxpayers affected by natural disasters providing further detail on these changes was issued 9 October 2011.