Income Tax Assessment Act 1997
CGT event D4 happens if you enter into a *conservation covenant over land you own. 104-47(2)
The time of the event is when you enter into the covenant. 104-47(3)
You make a *capital gain if the *capital proceeds from entering into the covenant are more than that part of the *cost base of the land that is apportioned to the covenant. You make a *capital loss if those capital proceeds are less than the part of the *reduced cost base of the land that is apportioned to the covenant.
The capital proceeds from entering into the covenant are modified if you do not receive anything for entering into the covenant: see section 116-105 .104-47(4)
The part of the *cost base of the land that is apportioned to the covenant is worked out in this way:
|*Cost base of land||×||
*Capital proceeds from entering into the covenant
Those capital proceeds plus the *market value of
the land just after you enter into the covenant
The part of the *reduced cost base of the land that is apportioned to the covenant is worked out similarly.104-47(5)
The *cost base and *reduced cost base of the land are reduced by the part of the cost base or reduced cost base of the land that is apportioned to the covenant.
Lisa receives $10,000 for entering into a conservation covenant that covers 15% of the land she owns. Lisa uses the following figures in calculating the cost base of the land that is apportioned to the covenant:
The cost base of the entire land is $200,000.
The market value of the entire land before entering into the covenant is $300,000, and its market value after entering into the covenant is $285,000.
Lisa calculates the cost base of the land that is apportioned to the covenant to be:
$200,000 × 10,000 ÷ [ 10,000 + 285,000] = $6,780
She reduces the cost base of the land by the part that is apportioned to the covenant:
$200,000 - $6,780 = $193,220
*CGT event D4 does not happen if:
(a) you did not receive any *capital proceeds for entering into the covenant; and
(b) you cannot deduct an amount under Division 31 for entering into the covenant.
In this case, CGT event D1 will apply.104-47(7)
A *capital gain or *capital loss you make is disregarded if you *acquired the land before 20 September 1985.
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