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Edited version of private ruling
Authorisation Number: 1011660543598
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Ruling
Subject: Capital gains tax (CGT)
1. Does the conversion of a Crown lease to freehold constitute a CGT event?
Yes.
2. Where the conversion of a special Crown lease to freehold constitutes a CGT event are you entitled to capital gains tax roll-over relief under section 124-575 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Yes.
3. Are you subject to CGT when the freehold property is sold?
No.
This ruling applies for the following period
Year ended 30 June 2011.
The scheme commenced on
1 July 2010.
Relevant facts
You entered into a crown lease a number of years ago.
The lease was for 99 years.
You built a house on the land 12 months later.
The land was converted to free hold prior to 1985.
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 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 1985. The crown lease was converted into a freehold prior to 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 in xxx.
Therefore, the property is a pre CGT asset and is not subject to when it is sold.