ATO Interpretative Decision
ATO ID 2002/67 (Withdrawn)
Income tax: Capital gains: Forfeiture of property under court order
FOI status: may be released
||This ATO ID is withdrawn. This ATO ID is a restatement of the law and does not contain an interpretative decision.
||This document has changed over time. View its history.
Status of this decision: Decision withdrawn 23 February 2018.
|CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.|
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
Is the forfeiture of a property under a State law a disposal of a CGT asset under subsection 104-10(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Yes, the forfeiture of a property under a State law is a disposal of a CGT asset under subsection 104-10(2) of the ITAA 1997.
A judgment was entered against the taxpayer. As a result of the judgment, certain property owned by the taxpayer was forfeited under a State law.
The property was not acquired before 20 September 1985 and was rented out for the period it was owned by the taxpayer.
Reasons for Decision
CGT event A1 happens when a taxpayer disposes of a CGT asset. A taxpayer disposes of a CGT asset when a change of ownership occurs from them to another entity, whether by some act or event or by operation of law (subsection 104-10(2) of the ITAA 1997). However, a change of ownership does not occur:
- if the taxpayer stops being the legal owner of the asset but continues to be its beneficial owner; or
- merely because of a change in the trustee.
In the present case, the property was forfeited under a State law. There has been a change of ownership from the taxpayer to the State by operation of law. The State is an entity for the purposes of the ITAA 1997 (see subsection 960-100(1) of the ITAA 1997). Consequently, the forfeiture of the property is a disposal of a CGT asset at the time CGT event A1 happened to the property.
As the property was compulsorily acquired by an entity under a power conferred by a State law, the time of the disposal is determined by subsection 104-10(6) of the ITAA 1997. The time of disposal will be the earlier of:
- when the taxpayer received compensation from the entity; or
- when the entity becomes the asset's owner; or
- when the entity entered it under that power; or
- when the entity took possession under that power.
As the property vested absolutely in the State when the forfeiture order was made, the State became the owner of the property on the date judgment was entered against the taxpayer in the Supreme Court of the State. This is when CGT event A1 happened to the taxpayer.
|Date of Amendment
|27 February 2015
||Minor amendments for clarity
||Reasons for Decision
||Deletion of reference to former paragraphs 104-10(2)(a) and (b) of the ITAA 1997.
Minor amendments for clarity
Date of decision: 24 October 2001
Income Tax Assessment Act 1997
Capital gains tax
CGT event A1-disposal of a CGT asset
CGT compulsory acquisitions
Business Line: Small Business/Individual Taxpayers
Date of publication: 27 January 2002
|ATO ID 2002/67 (Withdrawn) history