ATO Interpretative Decision
ATO ID 2003/520 (Withdrawn)
Income Tax
Capital Gains Tax: discount capital gain - lease surrender receipt by lessorFOI status: may be released
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This ATO ID is withdrawn as the ATO view on this matter is now contained in Taxation Ruling TR 2005/6.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Does CGT event C2 happen under Division 104 of the Income Tax Assessment Act 1997 (ITAA 1997) if a lessor surrenders its rights under a lease agreement?
Decision
Yes. CGT event C2 happens under section 104-25 of the ITAA 1997 when a lessor surrenders its rights under a lease agreement.
Facts
A lease agreement exists between a lessor and lessee. The lessee requests that the lease be terminated. The lessor agrees to the termination of the lease provided that the lessee pays to the lessor a lease surrender payment.
Reasons for Decision
Changes made to paragraphs 104-10(5)(b) and 104-25(5)(b) of the ITAA 1997 that apply to assessments for the 1998-99 and later income years recognise a lessor's rights under a lease as an asset for CGT purposes.
The entry into a lease by the lessor and lessee constitutes the acquisition of an asset by the lessor. The asset comprises the contractual rights vested in the lessor under the lease agreement, including the right to receive the nominated rent, but subject to the provision of possession.
Upon the surrender of the lease by the lessee, CGT event C2 happens to the lessor in relation to the surrender of its rights under the lease agreement. The surrender payment received by the lessor constitutes the capital proceeds for the event happening.
Date of decision: 1 April 2003Year of income: Year ended 30 June 1999
Legislative References:
Income Tax Assessment Act 1997
section 104-25
paragraph 104-10(5)(b)
paragraph 104-25(5)(b)
Keywords
Capital gains
Capital Gains Tax CoE
CGT events C1-C3 - end of a CGT asset
Leasing
Termination of leases
ISSN: 1445-2782
| Date: | Version: | |
| 1 April 2003 | Original statement | |
| You are here | 29 September 2006 | Archived |