Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 3 - Conservation covenants
Outline of chapter
3.1 Schedule 3 to this bill amends the ITAA 1997 to provide an income tax deduction for taxpayers entering into certain types of conservation covenants on or after 1 July 2002 with the Commonwealth, a State, a Territory or a local governing body, or an authority of the Commonwealth, a State or a Territory.
Context of amendments
3.2 In 2001, the ITAA 1997 was amended (Schedule 7, Taxation Laws Amendment Act (No. 2) 2001 ) to allow land holders a deduction when they enter into eligible conservation covenants with a fund, authority or institution that meets the requirements of section 31-10. Section 31-10 limits eligible funds, authorities or institutions to certain deductible gift recipients and prescribed private funds. The amount of the deduction is determined by the Commissioner and is generally equal to the fall in the market value of the land as a result of the conservation covenant.
3.3 This amendment will extend the deduction to taxpayers entering into certain types of conservation covenants with the Commonwealth, a State, a Territory or a local governing body, or an authority of the Commonwealth, a State or a Territory.
Summary of new law
3.4 Under the new law, the ITAA 1997 will allow an income tax deduction for land owners entering into conservation covenants (subject to conditions set out in section 31-5) with a fund, authority or institution that meets the requirements of section 31-10, or the Commonwealth, a State, a Territory or a local governing body, or an authority of the Commonwealth, a State or a Territory.
| New law | Current law |
|---|---|
| For the purposes of section 31-5, the covenant may now be entered into with:
|
For the purposes of section 31-5, the covenant must be entered into with certain deductible gift recipients and prescribed private funds. |
Detailed explanation of new law
3.5 On or after 1 July 2002, landowners who enter into conservation covenants over land they own are entitled to claim an income tax deduction if the conditions set out in section 31-5 are met. Schedule 4 amends one of the conditions of deduction in section 31-5 so that the covenant must now be entered into with:
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- a fund, authority or institution that meets the requirements of section 31-10;
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- the Commonwealth, a State, a Territory or a local governing body; or
- •
- an authority of the Commonwealth, a State or a Territory.
[Schedule 3, item 1, paragraph 31-5(2)(e)]
Application and transitional provisions
3.6 The amendments apply to conservation covenants entered into on or after 1 July 2002 [Schedule 3, item 2]. The retrospective application is advantageous to taxpayers.