ATO Interpretative Decision

ATO ID 2004/5 (Withdrawn)

Income Tax

Capital Gains Tax: CGT asset - water allocation
FOI status: may be released

This ATO ID is withdrawn as it is based on a straight forward application of the law.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 the water allocation, as recorded in the taxpayer's water allocation account pursuant to subsection 85(1) of the Water Management Act 2000 (NSW) (WMA 2000), a CGT asset, as defined in section 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997), that is separate from the access licence to which it relates?

Decision

Yes. A water allocation, as recorded in the taxpayer's water allocation account, is a CGT asset, as defined in section 108-5 of the ITAA 1997, that is separate from the access licence to which it relates.

Facts

The taxpayer holds an access licence under section 63 of the WMA 2000. In addition to the access licence, the taxpayer has a water allocation which is recorded in the water allocation account under subsection 85(1) of the WMA 2000 for that licence.

Reasons for Decision

Under subsection 56(1) of the WMA 2000, an access licence entitles its holder to take water, subject to the specifications applicable to that licence. This entitlement is a statutory right and the licence falls within the definition of 'CGT asset' in subsection 108-5(1) of the ITAA 1997.

The Dictionary in the WMA 2000 defines 'water allocation' to mean the water to which the holder of an access licence is entitled from time to time under the licence, as recorded pursuant to subsection 85(1) of the WMA 2000 on the account for the licence. Under subsection 85(1A) of the WMA 2000, a water allocation is credited to an access licence in accordance with any relevant 'available water determination'.

An 'available water determination' is a determination under subsection 59(1) of the WMA 2000 as to the availability of water for various categories of access licence, in relation to one or more water management areas or water sources. The allocation is also transferable from one access licence to another pursuant to section 71G of the WMA 2000. A water allocation is distinct from the share and extraction components of an access licence. The share and extraction components are specified in subsection 56(1) of the WMA 2000.

The water allocation is a statutory right. It falls within the definition of CGT asset in subsection 108-5(1) of the ITAA 1997. The water allocation is a separate CGT asset from the access licence.

Date of decision: 9 December 2003

Year of income: Year ended 30 June 2004

Legislative References:
Income Tax Assessment Act 1997
section 108-5
subsection 108-5(1)

Water Management Act 2000 (NSW)
   Dictionary
   subsection 56(1)
   subsection 59(1)
   section 71G
   subsection 85(1)
   subsection 85(1A)

Related ATO Interpretative Decisions
ATO ID 2003/1128

Keywords
Capital gains tax
CGT assets
Statutory licences

Business Line: Private Groups and High Wealth Individuals

Date of publication: 9 January 2004

ISSN: 1445-2782

history

	Date:	Version:
	9 December 2003	Original statement
You are here	29 August 2014	Archived

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