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Edited version of private advice

Authorisation Number: 1051658347424

Date of advice: 16 April 2020


Subject: Real Australian taxable property


Can a foreign resident disregard any capital gain made from the sale of water allocation rights?


Yes. Having considered the circumstances and the relevant factors the Commissioner considers that the sale of water rights, such as licences and water allocations, are capital gains tax (CGT) assets. The permanent trade of a water right is a disposal of a CGT asset. Water rights are not taxable Australian real property under Subdivision 855 of the Income Tax Assessment Act 1997.

A person who is a foreign resident, just before the CGT event happens, may disregard a capital gain or capital loss from a CGT event if the event happens in relation to a CGT asset that is not taxable Australian real property.

Further information can be found by searching 'QC 42314 on ato.gov.au

This ruling applies for the following periods:

Income year ending 30 June 20XX

Income year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The taxpayer is a foreign resident for income tax purposes.

The property was acquired prior to 1985.

Water allocation rights were separated from the land some 15 years ago.

Water allocation rights are a CGT asset.

Water allocation rights are not taxable Australian real property.

The taxpayer a percentage of the asset.

The taxpayer has not carried on a business in Australian.

The water allocation right was disposed of.

The water allocation proceeds were $XXX,XXX

Relevant legislative provisions

Income Tax Assessment Act 1997 section 855-10

Income Tax Assessment Act 1997 section 855-15

Income Tax Assessment Act 1997 section 855-20