ATO Interpretative Decision

ATO ID 2003/518

Income Tax

CGT: redescription of land boundary and issue of new title - does a CGT event occur?
FOI status: may be released

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 A1, or any other CGT event, occur when the taxpayer surrenders the title to land granted under a State Act so that the State can issue a new title to the taxpayer in respect of the same land?

Decision

No. Neither CGT event A1 nor any other CGT event occurs when the taxpayer surrenders the title to land granted under a State Act so that the State can issue a new title to the taxpayer in respect of the same land.

Facts

To satisfy the requirements of relevant State legislation, the taxpayer surrendered their title to a piece of land that it owned. This was done to facilitate the issue of a fresh title to the taxpayer that more accurately described the boundaries of the land.

It had become necessary to redefine the boundaries of the property to effectively exclude physical accretions to the land that had occurred over time. This adjacent land had accreted as a result of the placement of structures by previous owners which disrupted the natural tidal flow, causing sand to build up over time.

Pursuant to the relevant State legislation, the ownership of such accretions of land vests in the State and not the owner of the adjacent property (the taxpayer).

The only method provided for the correction of boundaries under the relevant State legislation, required the taxpayer to execute an ordinary deed of transfer of the land in favour of the State, to enable the State to cancel the existing title and to issue a new title to the taxpayer showing the correct boundaries.

Reasons for Decision

The relevant State legislation provided that any land that had accreted to land owned by the taxpayer would belong to the State. Therefore, there was no issue of the taxpayer disposing of or causing any CGT event to occur in relation to the accreted land since it did not lawfully belong to the taxpayer.

For the original land which did not arise from accretion, the taxpayer was indisputably the owner of it and although the State Law required that the title be 'surrendered' (to correct the boundaries), it is clear from the provisions that the surrender was only the first step in the process stipulated for boundary correction, with the State being obligated to issue a replacement title setting out the exact land already owned by the taxpayer.

The surrender of the Title to the State did not have the effect that the taxpayer was no longer the owner of its land and the issue of a new title did not give devolve or confer any interest in the land upon the taxpayer. At all times the taxpayer retained beneficial ownership of the land.

In the circumstances it is considered that a change of ownership of the land did not occur, in terms of paragraph 104-10(2)(a) of the ITAA 1997. Therefore, no CGT event A1 occurred under section 104-10 of the ITAA 1997. Furthermore, the circumstances of the transaction did not lead to any other CGT event occurring.

Amendment History

Date of Amendment	Part	Comment
17 November 2017	Decision	Add reference to 'any other CGT event' consistent with 'Issue' and 'Reasons for Decision'

Date of decision: 5 March 2003

Year of income: Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005

Legislative References:
Income Tax Assessment Act 1997
section 104-5
section 104-10

Keywords
Capital gains tax
Capital gains
CGT replacement assets
Centres of Expertise
Capital Gains Tax CoE
CGT events
CGT event A1-disposal of a CGT asset
CGT events J1-J3 - rollovers

Siebel/TDMS Reference Number: 3084944; 1-7PB4E5I

Business Line: Small Business/Individual Taxpayers

Date of publication: 4 July 2003
Date reviewed: 9 November 2017

ISSN: 1445-2782

history

	Date:	Version:
	5 March 2003	Original statement
You are here	17 November 2017	Updated statement

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