Edited version of private advice

Authorisation Number: 1052060388414

Date of advice: 25 November 2022

Ruling

Subject: CGT - pre-CGT asset - lump sum payment

Question 1:

Was the Property the relevant capital gains tax asset in relation to the Payment?

Answer:

No.

Question 2:

Did a capital gains tax event C2 occur in relation to your right to receive the contribution when the Payment was made?

Answer:

Yes.

Based on the information provided:

•                     The Property was not the relevant capital gains tax (CGT) asset in relation to the Payment in accordance with the principles contained in TR 95/35 as it was not disposed of, nor had it been permanently reduced in value because of some act that had resulted in you obtaining a right to receive the Payment from the Council

•                     When you purchased the Property, you also acquired a separate intangible CGT asset, being your right to a contribution from the Council if a subdivision proceeded; and

•                     When the Council made the Payment to you, CGT event C2 occurred and your right to receive the Payment was cancelled.

This ruling applies for the following period:

Income year ending 30 June 20XX.

The scheme commences on:

1 July 20XX.

Relevant facts and circumstances

You, being Person A and Person B, purchased a property (the Property) prior to 20 September 1985.

The Property was vacant land with a land area of more than two hectares on which you constructed a house immediately after it was purchased, which has been your family home since the construction was completed until the present time.

The Property had been part of the subdivision of a larger property into smaller acreage lots by the original owner (Person X). It was designated as part of the Council's structure plans for which land was contributed by Person X in relation to the historic subdivision for future development of public open space reserves that formed part of the Council's plans, being referred to as historic public open space (POS) credits.

The historic POS credits would normally be offset against a landowner's contributions at the time of the future subdivision. However, the Council determined that the historic POS credits would be finalised as a payment to the current landowners rather than awaiting the landowners to subdivide their land.

You received a payment from the Council in relation to the historic POS credits related to the Property (the Payment), which is the only and final payment you will receive in relation to the historic POS credit.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 102-20

Income Tax Assessment Act 1997 section 104-25

Income Tax Assessment Act 1997 section 108-5