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Edited version of private advice
Authorisation Number: 1051969330700
Date of advice: 13 April 2022
Ruling
Subject: Conservation covenant
Question 1
Does entering a conservation covenant create a capital gains tax event?
Answer
Yes
Question 2
Is the capital gains tax event at time of entering the covenant a D1 event?
Answer
Yes
Question 3
Is the capital gain at time of entering the covenant nil?
Answer
Yes
Question 4
Is the capital loss at time of entering the covenant nil?
Answer
Yes
This ruling applies for the following period
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You own a holiday home as joint tenants.
Your holiday home was purchased on XX
The purchase price of your holiday home was $XX.
Your holiday home is on XX hectares of land.
Your holiday home is not a primary place of residence.
You do not derive income from the holiday home.
You intend to enter a permanent conservation agreement made under the Biodiversity Conservation Act 2016 (NSW) with the Biodiversity Conservation Trust of NSW.
The permanent conservation agreement will cover XX hectares of the property.
You will not be in receipt of any capital proceeds for entering the conservation agreement.
You will not be in receipt of any ongoing income for entering the conservation agreement.
You will not be making a deduction under Division 31 of the Income Tax Assessment Act 1997 for entering the covenant.
You claim that any change to the value of the property as a result of entering the conservation convent agreement will not be realised until the property is sold.
You state you will not incur costs as a result of entering the conservation agreement.
Relevant legislative provisions
Section 104-47 Income Tax Assessment Act 1997
Subsection 104-47(6) Income Tax Assessment Act 1997
Division 31 Income Tax Assessment Act 1997