ATO Interpretative Decision
ATO ID 2004/229
Superannuation
Business real property - water licencesFOI status: may be released
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Are water licences business real property, as defined in subsection 66(5) of the Superannuation Industry (Supervision) Act 1993 (SISA)?
Decision
No. Water licences are not business real property, as defined in subsection 66(5) of the SISA.
Facts
A superannuation fund currently owns a water licence
Reasons for Decision
Subsection 66(5) of the SISA defines business real property as:
- (a)
- any freehold or leasehold interest of the entity in real property; or
- (b)
- any interest of the entity in Crown land, other than a leasehold interest, being an interest that is capable of assignment or transfer; or
- (c)
- if another class of interest in relation to real property is prescribed by the regulations for the purposes of this paragraph - any interest belonging to that class that is held by the entity;
where the real property is used wholly and exclusively in one or more businesses (whether carried on by the entity or not), but does not include any interest held in the capacity of beneficiary of a trust estate.
The term 'real property' is not defined either in the SISA or in the Superannuation Industry (Supervision) Regulations 1994. The Encyclopaedic Australian Legal Dictionary defines real property as 'land and interests in land', while the Macquarie Dictionary defines real property as 'tangible and immovable property such as land and houses, buildings or any such structures on the land'.
A water allocation or entitlement authorised by a water licence is an asset which is separate from the land. It can be traded and ownership transferred without any impact on the title of the land. The licence is not a fixture or a structure attached to the land. The water licence has a value in its own right and can be transferred through a sale or a lease. Accordingly, a water right is not business real property as defined in subsection 66(5) of the SISA.
Date of decision: 27 February 2004Year of income: Year ending 30 June 2001
Legislative References:
Superannuation Industry (Supervision) Act 1993
subsection 66(5)
ATO ID 2002/699
ATO ID 2004/230
ATO ID 2004/231
Keywords
Self managed superannuation funds
SMSF acquisition of assets
SMSF business real property
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 27 February 2004 | Original statement |
| 8 May 2009 | Archived |