Taxation Determination TD 2018/15, issued on 31 October 2018, considers the CGT consequences of granting an easement, profit à prendre or licence over an asset. 

In the ATO's view, CGT event D1 (creating contractual or other rights) rather than CGT event A1 (disposing of an asset) happens when any of the following rights are granted over an asset:
  • an easement, other than one arising by operation of law;
  • a profit à prendre (a right to enter and remove a product or part of the soil from the taxpayer's land); or 
  • a licence (which does not confer the right of exclusive possession of land). 

The consequences of CGT event D1 being the relevant CGT event are that:

  • in determining the amount of any capital gain or loss that arises from the grant over the asset, no part of the asset's cost base is taken into account; 
  • any capital gain from the grant is not a discount capital gain;
  • the main residence exemption is not available; and
  • any capital gain or loss cannot be disregarded merely because the asset over is a pre-CGT asset. This means, for instance, that CGT event D1 can happen where a right is granted over pre-CGT land – see Examples 1 and 2 of TD 2018/15. In Example 3, however, the ATO concludes that the sale of timber is not subject to CGT if the timber was cut from pre-CGT land and trees.

TD 2018/15 applies before and after its date of issue.

Withdrawn rulings

TD 2018/15 is a "refresh" of Ruling IT 2561 Capital gains: grants of easements, profits à prendre and licences, which was withdrawn from 31 October 2018. TD 2018/15 also consolidates the following Taxation Determinations, all of which were withdrawn on 31 October 2018:

  • TD 93/79 Capital gains: if a taxpayer owns pre-CGT land and trees and after 19 September 1985 the taxpayer cuts the trees, are there any CGT consequences arising from the subsequent sale of the timber by the taxpayer?
  • TD 93/81 Capital gains: a taxpayer owns pre-CGT land and trees. The taxpayer sells timber according to two post-CGT contracts: over a period of time and remove timber as and when required; and a contract for the sale of the uncut timber. How is the sale treated for CGT purposes?
  • TD 93/235 Capital gains: how are grants of easements treated for the purposes of the CGT provisions of the ITAA 1936?
  • TD 93/236 Capital gains: does the principal residence exemption apply to the amount received for the granting of an easement or profits à prendre over land adjacent to a dwelling?
  • TD 96/35 Capital gains: when does a person, who on or after 21 September 1989 grants to another a right to cut and remove timber from the grantor's land, dispose of the right? Is it when the right is granted or when the trees are felled?