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INCOME TAX ASSESSMENT ACT 1997 - SECT 104.47

Conservation covenants: CGT event D4

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

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

  (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.

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

Start formula *Cost base of land times start fraction *Capital proceeds from entering into the covenant over Those capital proceeds plus the *market value of the land just after you enter into the covenant end fraction end formula

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

  (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:

Start formula $200,000 times 10,000 divided by open bracket 10,000 plus 285,000 close bracket equals $6,780 end formula

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

Start formula $200,000 minus $6,780 equals $193,220 end formula

Exceptions

  (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.

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

Table of sections

104 - 55   Creating a trust over a CGT asset: CGT event E1

104 - 60   Transferring a CGT asset to a trust: CGT event E2

104 - 65   Converting a trust to a unit trust: CGT event E3

104 - 70   Capital payment for trust interest: CGT event E4

104 - 71   Adjustment of non - assessable part

104 - 72   Reducing your capital gain under CGT event E4 if you are a trustee

104 - 75   Beneficiary becoming entitled to a trust asset: CGT event E5

104 - 80   Disposal to beneficiary to end income right: CGT event E6

104 - 85   Disposal to beneficiary to end capital interest: CGT event E7

104 - 90   Disposal by beneficiary of capital interest: CGT event E8

104 - 95   Making a capital gain

104 - 100   Making a capital loss

104 - 105   Creating a trust over future property: CGT event E9

104 - 107A   AMIT--cost base reduction exceeds cost base: CGT event E10

104 - 107B   Annual cost base adjustment for member's unit or interest in AMIT

104 - 107C   AMIT cost base net amount

104 - 107D   AMIT cost base reduction amount

104 - 107E   AMIT cost base increase amount

104 - 107F   Receipt of money etc. increasing AMIT cost base reduction amount not to be treated as income

104 - 107G   Effect of AMIT cost base net amount on cost of AMIT membership interest or unit that is a revenue asset--adjustment of cost of asset

104 - 107H   Effect of AMIT cost base net amount on cost of AMIT membership interest or unit that is a revenue asset--amount included in assessable income


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