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Edited version of private advice
Authorisation Number: 1051660720766
Date of advice: 16 April 2020
Ruling
Subject: Taxable Australian real property
Question
Can a foreign resident disregard any capital gain made from the sale of water allocation rights?
Answer
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 XX 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
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