Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS  

Division 104 - CGT events  

Subdivision 104-D - Bringing into existence a CGT asset  

SECTION 104-47   Conservation covenants: CGT event D4  

104-47(1)    
CGT event D4 happens if you enter into a *conservation covenant over land you own.

104-47(2)    
The time of the event is when you enter into the covenant.

104-47(3)    
You make a *capital gain if the *capital proceeds from entering into the covenant are more than that part of the *cost base of the land that is apportioned to the covenant. You make a *capital loss if those capital proceeds are less than the part of the *reduced cost base of the land that is apportioned to the covenant.

Note:

The capital proceeds from entering into the covenant are modified if you do not receive anything for entering into the covenant: see section 116-105 .

104-47(4)    
The part of the *cost base of the land that is apportioned to the covenant is worked out in this way:

*Cost base of land

×

*Capital proceeds from entering into the covenant Those capital proceeds plus the *market value of   the land just after you enter into the covenant

The part of the *reduced cost base of the land that is apportioned to the covenant is worked out similarly.

104-47(5)    

The *cost base and *reduced cost base of the land are reduced by the part of the cost base or reduced cost base of the land that is apportioned to the covenant.

Example:

Lisa receives $10,000 for entering into a conservation covenant that covers 15% of the land she owns. Lisa uses the following figures in calculating the cost base of the land that is apportioned to the covenant:

The cost base of the entire land is $200,000.

The market value of the entire land before entering into the covenant is $300,000, and its market value after entering into the covenant is $285,000.

Lisa calculates the cost base of the land that is apportioned to the covenant to be:

$200,000 × 10,000 ÷ [ 10,000 + 285,000] = $6,780

She reduces the cost base of the land by the part that is apportioned to the covenant:

$200,000 − $6,780 = $193,220

Exceptions

104-47(6)    
*CGT event D4 does not happen if:

(a) you did not receive any *capital proceeds for entering into the covenant; and

(b) you cannot deduct an amount under Division 31 for entering into the covenant.

Note:

In this case, CGT event D1 will apply.

104-47(7)    
A *capital gain or *capital loss you make is disregarded if you *acquired the land before 20 September 1985.