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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1012758552517

Ruling

Subject: Capital gains tax

Question 1

Does the conversion of a Crown lease to freehold constitute a capital gains tax event?

Answer

Yes.

Question 2

Where the conversion of a special Crown lease to freehold constitutes a capital gains tax event is the rulee entitled to capital gains tax roll-over relief under section 124-575 of the ITAA 1997?

Answer

Yes.

Question 3

Are you subject to capital gains tax when the freehold property is sold?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2014

The scheme commences on:

1983

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You purchased a lease over Crown land prior to 20 September 1985.

The lease was converted to a freehold interest after 20 September 1985.

You signed a contract to sell the property on 1 October 2013.

The contract settled on 31 October 2013.

No significant improvements have been made to the property.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 102-20.

Income Tax Assessment Act 1997 Subsection 108-55(2).

Income Tax Assessment Act 1997 Subsection 124-10(2).

Income Tax Assessment Act 1997 Subsection 124-10(4).

Income Tax Assessment Act 1997 Section 124-575.

Income Tax Assessment Act 1997 Section 124-580.

Income Tax Assessment Act 1997 Section 104-25.

Reasons for decision

A capital gain or capital loss is made as a result of a capital gains tax (CGT) event happening to a CGT asset.

When a Crown lease is converted to a freehold title, a CGT event happens. You surrender a right (the Crown lease) and acquire a new right (the freehold title) as a replacement asset.

A replacement asset roll-over is available on the conversion of a Crown lease to a freehold title.

The roll-over is automatic and any capital gain or capital loss made from the original asset is disregarded.

Where the original Crown lease was acquired before 20 September 1985, the date of acquisition of the replacement asset (freehold) is taken to be the date that the original Crown lease was acquired.

In your case, you acquired the crown lease prior to 20 September 1985. The crown lease was converted into a freehold after 20 September 1985. Therefore, in accordance with the replacement asset roll-over, you are taken to have acquired the freehold on the date that the Crown lease was originally acquired before 20 September 1985.

Therefore the property is a pre CGT asset and was not subject to capital gains tax when it was sold.


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