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Edited version of your private ruling
Authorisation Number: 1012488843432
Ruling
Subject: Capital gains tax - disposal
Question
Will the capital gain made on the disposal of property originally acquired under leasehold be disregarded?
Answer
Yes
This ruling applies for the following period<s>:
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
The scheme commences on:
1 July 2012
Relevant facts and circumstances
You acquired land by way of crown lease prior to 20 September 1985.
You applied to purchase this land many years later.
The land was converted to freehold title upon receipt of payment.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-20,
Income Tax Assessment Act 1997 Section 104-10,
Income Tax Assessment Act 1997 Subsection 104-10(5) and
Income Tax Assessment Act 1997 Subsection 124-10(2).
Reasons for decision
Section 102-20 of the Income Tax Assessment Act 1997 provides that you can make a capital gain or loss if and only if a CGT event occurs. The most common CGT event, CGT event A1, occurs when you dispose of a CGT asset to someone else, for example, if you sell a property.
When a Crown Lease is converted to a freehold title, a CGT event will occur. You dispose of a right (the Crown Lease) and acquire a new right (the freehold title) as a replacement asset.
On the conversion of a Crown Lease to a freehold title, replacement asset rollover in accordance with subdivision 124-J of the ITAA 1997 will occur. The rollover is automatic and any capital gain or capital loss made from the original asset is disregarded (subsection 124-10(2) of the ITAA 1997).
In this case, as the freehold title on the land was acquired as a result of replacement asset rollover, the date of acquisition of the freehold is taken to have been acquired on the date you acquired the lease (subsection 124-10(4) of the ITAA 1997).
Upon sale of your interest in the freehold lease, CGT event A1 will occur (section 104-10 of the ITAA 1997). However, as you are taken to have acquired your freehold lease prior to 20 September 1985, any capital gain or capital loss made on the disposal will be disregarded (subsection 104-10(5) of the ITAA 1997).