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Edited version of your written advice
Authorisation Number: 1051425881557
Date of advice: 12 September 2018
Ruling
Subject: CGT Rollover - Crown Land.
Question 1
Is the change from a Crown Lease to freehold a capital gains tax event (CGT)?
Answer
Yes.
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.
Question 2
If it is a CGT event, is there an entitlement to the CGT Rollover relief under section 124-575 of the ITAA 1997?
Answer
Yes.
While the ending of the lease would normally constitute a CGT event under section 104-25 of the ITAA 1997, the rollover provisions under section 124-J automatically apply where a Crown Lease is renewed or converted to a freehold estate. Accordingly, in your circumstances where the lease was surrendered and you acquired freehold title, any capital gain or loss is disregarded.
Question 3
Is the sale of the property considered to be the sale of a pre-CGT asset?
Answer
Yes.
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.
You entered into a Crown Lease agreement of a property with a dwelling on it with the Relevant Australian Government before 20 September 1985 therefore the property will retain its pre-CGT status.
This ruling applies for the following period:
Year ended 30 June 2XXX
The scheme commences on:
2 June 19XX.
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.
Prior to 20 September 1985, you acquired a property which was situated on crown land, under a Crown Lease (the property).
The property had a dwelling on it (the shack) which you maintained.
You did not make any major capital improvements to the property during your ownership period.
An application was made to surrender the Crown Lease in after 19 September 1985 for a land grant (freehold).
The application was approved and the title was transferred to you on XX June 2XXX.
The property was sold during the 2018 income year.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-25
Income Tax Assessment Act 1997 section 124-575
Income Tax Assessment Act 1997 subsection 124-15(2)
Income Tax Assessment Act 1997 subdivision 124-J