ATO Interpretative Decision
ATO ID 2007/164 (Withdrawn)
Income Tax
Capital Gains Tax: rollover relief - compulsory acquisition - easement createdFOI status: may be released
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This ATO Interpretative Decision is withdrawn because a part of the Reasons for Decision has been altered and enhanced. The current ATO position on this issue is contained in ATO Interpretative Decision 2010/34. The decision in the latter is the same as in ATO ID 2007/164.This document has changed over time. View its history.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Can any of the rollover threshold conditions in paragraphs 124-70(1)(a), 124-70(1)(aa) or 124-70(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) be satisfied by an entity that has an easement created over their land?
Decision
No. The threshold conditions in paragraphs 124-70(1)(a), 124-70(1)(aa) or 124-70(1)(c) of the ITAA 1997 cannot be satisfied in this case.
Facts
An Australian government agency (the acquirer) intends to obtain road access across a landowner's property for the construction of an infrastructure facility.
The acquirer serves a notice on the landowner inviting them to negotiate for the creation of an easement over the landowner's land. The notice informs the landowner that if negotiations are unsuccessful, the acquirer will proceed to create an easement pursuant to its powers under State legislation.
The parties negotiate and agree.
An easement is created, for which the acquirer pays an amount to the landowner.
Reasons for Decision
Provided the other requirements are satisfied capital gains tax rollover relief under Subdivision 124-B of the ITAA 1997 may be available where the threshold conditions in paragraphs 124-70(1)(a), 124-70(1)(aa) or 124-70(1)(c) of the ITAA 1997 are satisfied.
Both paragraphs 124-70(1)(a) and 124-70(1)(aa) of the ITAA 1997 require that an asset that you own is compulsorily 'acquired' by another entity.
Paragraph 124-70(1)(c)of the ITAA 1997 requires a 'disposal' from you to another entity in circumstances where the disposal takes place after service on you of a notice inviting negotiation for a sale and informing that, if negotiations are unsuccessful, compulsory acquisition will follow.
A disposal involves a change of ownership of an asset from you to another entity (subsection 995-1(1) of the ITAA 1997, definition of 'dispose of').
For rollover relief under Subdivision 124-B of the ITAA 1997 to be available, there must be a change in ownership of an asset that is the subject of the capital gains tax (CGT) event, which must exist both before and after the event.
There is no change of ownership of an asset upon the creation of an easement because a new asset, an easement, is being created.
Therefore, the threshold conditions in paragraphs 124-70(1)(a), 124-70(1)(aa) and 124-70(1)(c) of the ITAA 1997 cannot be satisfied in this case.
Accordingly, the taxpayer cannot claim the rollover relief under Subdivision 124-B of the ITAA 1997.
Date of decision: 6 August 2007Year of income: Year ended 30 June 2006
Legislative References:
Income Tax Assessment Act 1997
Subdivision 124-B
paragraph 124-70(1)(a)
paragraph 124-70(1)(aa)
paragraph 124-70(1)(c)
subsection 995-1(1)
Related Public Rulings (including Determinations)
TR 97/3
Keywords
Capital gains tax
CGT compulsory acquisitions
CGT events
CGT roll-over relief
Disposal of assets
ISSN: 1445-2782
| Date: | Version: | |
| 6 August 2007 | Original statement | |
| You are here | 12 February 2010 | Archived |