Peter Costello

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Capital Gains Tax Amendments and Private Conservation


Capital Gains Tax Amendments and Private Conservation

I am announcing amendments to the capital gains tax (CGT) rules to ensure that landowners who set aside part or all of their land for conservation in perpetuity will not be disadvantaged. The change will result in a lower tax liability for most landowners entering into perpetual conservation covenants, and a zero tax liability for those landowners who have held their land since before 20 September 1985.

Governments and environmental philanthropic organisations enter into covenants with landowners to conserve their property in perpetuity, in order to maintain its environmental value for all Australians. Previously, nearly all the consideration received for entering into such covenants was taxable. Landowners have not been able to access the pre-1985 exemption or the 12 months CGT discount.

The amendments should promote greater participation in perpetual conservation covenants and so enhance the protection of Australias unique and fragile native ecosystems.

Under these amendments, at the time of entering into the covenant the landowner will apportion the cost base of the property between that part subject to the covenant and the remaining property. The covenant will then be treated as a part disposal of the property. CGT will be payable on the difference between the consideration received and the cost base apportioned to the covenant. When the land is subsequently sold, any capital gain will be calculated on the difference between the sale price and the remaining cost base of the property.

The capital gain made from the covenant will attract a pre-1985 exemption, or the 12 months CGT discount for individuals, trusts and complying superannuation entities, where applicable. In addition to these benefits, small business landowners who enter into conservation covenants may be able to access the small business CGT concessions.

The change will be of immediate benefit to landowners who have negotiated covenants with the Tasmanian Private Forest Reserve Program, as well as being relevant to landowners throughout Australia.

Only those covenants entered into for a consideration, and which enhance Australias environmental values will be eligible for the new tax treatment. Programs offering conservation covenants would need to be accredited by the Federal Minister for the Environment. Legislation to implement the Governments decision will be introduced into the Parliament as soon as practicable. The amendments will take effect from 15 June 2000, so as to benefit all landowners who have entered into covenants under the Tasmanian Private Forest Reserve Program.

15 June 2001

Andrew Stephens (ATO): 02 6216 1105
Scott Bartley (Treasury): 02 6263 4411

15 Jun 2001

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