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ATO Interpretative Decision

ATO ID 2004/172 (Withdrawn)

Income Tax
Capital gains tax: CGT event - investor selling a carbon sequestration right

Attention This ATO ID is withdrawn. Guidance relating to this issue can be found in Information for primary producers.
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 5 May 2017.

CautionCAUTION: 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.


Does CGT event A1, under section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997), happen when the investor sells a carbon sequestration right, as defined in section 87A of the Conveyancing Act 1919 (NSW) (the Conveyancing Act), before the end of the contract?


Yes. CGT event A1, under section 104-10 of the ITAA 1997, happens when the investor sells a carbon sequestration right, as defined in section 87A of the Conveyancing Act, before the end of the contract.


An investor enters into a contract with a New South Wales landowner for the acquisition of a carbon sequestration right, as defined in section 87A of the Conveyancing Act. The term of the contract is 20 years. During the fifth year of the contract, the investor sells the right to another investor.

Reasons for Decision

Subsection 104-10(1) of the ITAA 1997 states that CGT event A1 happens if you dispose of a CGT asset. Under subsection 104-10(2) of the ITAA 1997, you dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law.

A carbon sequestration right, as defined under section 87A of the Conveyancing Act, is a legal right that satisfies the definition of 'CGT asset' in subsection 108-5(1) of the ITAA 1997.

Under subsection 960-100(1) of the ITAA 1997, an entity is defined as any of the following:

  an individual;
  a body corporate;
  a body politic;
  a partnership;
  any other unincorporated association or body of persons;
  a trust;
  a superannuation fund.

A carbon sequestration right is defined in section 87A of the Conveyancing Act as follows:

    carbon sequestration right in relation to land, means a right conferred on a person by agreement or otherwise to the legal, commercial or other benefit (whether present or future) of carbon sequestration by any existing or future tree or forest on the land after 1990.

The selling of the right to another entity before the end of the contract constitutes a change of ownership of the asset, and hence a disposal of a CGT asset under subsection 104-10(1) of the ITAA 1997.

Date of decision: 12 February 2004

Year of income:Year ended 30 June 2004

Legislative references:
Income Tax Assessment Act 1997
   section 104-10
   subsection 104-10(1)
   subsection 104-10(2)
   subsection 108-5(1)
   section 960-100

Conveyancing Act 1919 (NSW)
   section 87A

Related ATO Interpretative Decisions
ATO ID 2004/163
ATO ID 2004/171

Capital gains tax
CGT assets
CGT event A1-disposal of a CGT asset
CGT events

Siebel/TDMS reference number: 3922578; 1-5IQ22IB; 1-AXQRCEY

Business line: Private Groups and High Wealth Individuals

Date of publication: 24 February 2004
Date reviewed: 24 June 2014

ISSN: 1445-2782

ATO ID 2004/172 (Withdrawn) history   Top  
   Date   Version 
   12 February 2004   Original statement   
 You are here ®   5 May 2017   Withdrawn   


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