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ATO Interpretative Decision

ATO ID 2003/250 (Withdrawn)

Income Tax

CGT Dairy industry deregulation: small business concessions - active asset - payment right
FOI status: may be released
  • This ATO ID has been withdrawn from the database because it contains a view in respect of particular transactions that occurred in the 2000/2001 to 2008/2009 income years. Despite its withdrawal from the database, this ATO ID continues to be a precedential view in respect of those particular transactions that occurred during those income years.
    This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Is a dairy structural adjustment program (DSAP) payment right an active asset under section 152-40 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. A DSAP payment right is not an active asset under section 152-40 of the ITAA 1997?

Facts

The Australian dairy industry was deregulated on 1 July 2000. Deregulation involved, among other things, Commonwealth legislation which provided for 2 types of payments to dairy farmers as follows:

•
dairy structural adjustment program (DSAP) payments - being quarterly payments receivable over an 8 year period.
•
dairy exit payments - available for farmers who chose to leave agriculture.

With respect to the DSAP payments, farmers were granted a DSAP payment right of a certain value based on their past production, entitling them to a future stream of payments. The payment rights are transferable.

Reasons for Decision

For a CGT asset of a business to be an active asset for the purposes of Division 152 of the ITAA 1997 it must firstly satisfy one of the 'positive tests' in subsection 152-40(1) of the ITAA 1997 and then also not be excluded by one of the exceptions in subsection 152-40(4) of the ITAA 1997.

Under subsection 152-40(1) of the ITAA 1997 a CGT asset is an active asset at a particular time if, at that time, it is owned and used (or held ready for use) by a taxpayer or certain related entities in the course of carrying on a business or is an intangible asset that is inherently connected with a business that the taxpayer carries on.

However, paragraph 152-40(4)(d) of the ITAA 1997 provides that an asset that is a financial instrument cannot be an active asset.

A DSAP payment right has features that are characteristic of other financial instruments such as a face value, a discounted present value, an income stream and tradeability and fits within the concept of a financial instrument.

A DSAP payment right is therefore not an active asset under section 152-40 of the ITAA 1997. The small business CGT concessions contained in Division 152 of the ITAA 1997 will not apply to any capital gain made on a disposal of a DSAP payment right.

Note: The CGT discount in Division 115 of the ITAA 1997 may apply to a capital gain made on a disposal of a DSAP payment right if it was acquired at least 12 months before its disposal and the other conditions are satisfied.

Date of decision:  7 February 2003

Year of income:  Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1997
   Division 115
   section 152-40
   subsection 152-40(1)
   subsection 152-40(4)
   paragraph 152-40(4)(d)

Related ATO Interpretative Decisions
ATO ID 2003/251
ATO ID 2003/252

Keywords
Agriculture
Capital gains
Capital gains tax
Capital receipts
Capital losses offset
CGT Small Business relief
Basic conditions for relief
Active asset test
Dairy industry
Grants of financial assistance & funding
Small business retirement exemption
Small business 50% reduction
Small business rollover
Small business 15 year exemption

Business Line:  Losses and CGT Centre of Expertise

Date of publication:  24 April 2003

ISSN: 1445-2782

history
  Date: Version:
  7 February 2003 Original statement
You are here 14 May 2010 Archived

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