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Edited version of private advice
Authorisation Number: 1051740685766
Date of advice: 19 August 2020
Ruling
Subject: Capital gains tax (CGT)
Question 1
Has CGT event D4 occurred when you entered into a Biodiversity Stewardship Agreement (BSA) entitling you to receive biodiversity credits as per section 104-47(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer 1
Yes. The Commissioner accepts that you entered a conservation covenant through the entering of the BSA. Therefore, CGT event D4 has occurred and you can use Class Ruling CR 2009/77Income tax: NSW Department of Environment, Climate Change and Water - Biodiversity Banking and Offsets Scheme and the following formula in section 104-47(4) of the ITAA 1997 to calculate your CGT liability.
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Cost base of land |
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Capital proceeds from entering into the covenant Those capital proceeds plus the market value of the land just after you enter into the covenant. |
Question 2
Has CGT event A1 occurred when you disposed of biodiversity credits via a sale of the credits as per section 104-10 of the ITAA 1997?
Answer 2
Yes. The Commissioner accepts that the biodiversity credits you held are a capital asset. Therefore, the disposal of these credits has in turn trigged CGT event A1. You can use CR 2009/77andsections 100-45 and 100-50 of the ITAA 1997 to calculate your CGT liability.
Question 3
Do you meet the basic conditions for small business concessions in accordance with section 152-10 of the ITAA 1997?
Answer 3
Yes. The Commissioner accepts that you meet the basic conditions to make use of the small business 50% reduction and the small business replacement asset rollover.
Please note that The Commissioner has not determined your eligibility to use the small business 15-year exemption or the small business retirement exemption.
This ruling applies for the following period:
Year ended 30 June 2020
The scheme commences on:
1 July 2019
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.
The company is a farming company that owns farmland and land on a capital basis.
The company has been operating a farming business on the land since XXXX and is registered for Goods and Service Tax (GST).
The gross income of the company and associated entities is less than $2,000,000.
Since acquisition of the land, the land has been used for in the course of carrying on your farming activities.
The company entered into a BSA in accordance with the Biodiversity Act 2016 (NSW).
Under the BSA the company received biodiversity credits (credits), with an amount to be contributed to the company's total fund deposit (TFD).
The capital proceeds assigned to credits were sold not long after they were issued, less the required to be contributed to the TFD.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 100-45
Income Tax Assessment Act 1997 section 100-50
Income Tax Assessment Act 1997 section104-10
Income Tax Assessment Act 1997 section104-47
Income Tax Assessment Act 1997 section 152-10