Owners of investment properties involved in the Australian Lockyer Valley Regional
Council's land swap program will be eligible for capital gains tax (CGT) relief
as part of the federal government's ongoing work to assist people affected by
the floods last summer. It is estimated that about 40% of the properties eligible
to be swapped as part of the program are investment properties.
The land-swap deal will relocate residents of the Lockyer Valley, which was
devastated by the floods, to higher ground which should be safe from any future
flooding events. Participants will be able to swap their piece of land in the
flood zone for a block located on a nearby hill.
Currently, taxpayers affected by a natural disaster may have to pay CGT when
a property they own is destroyed or disposed of and they receive a replacement
property from an Australian government agency (Commonwealth, State, Territory
or local) in a land swap program for natural disasters.
Under the new proposals taxpayers that are affected by a natural disaster will
be able to choose an exemption for a CGT asset that is replaced under an Australian
government agency replacement asset program.
Taxpayers that are affected by a natural disaster that receive a replacement
asset under an Australian government agency program will obtain a CGT exemption
if they face CGT consequences on rights that arise under the program. A CGT
exemption will also apply to rights arising under a cash grant program for taxpayers
affected by a natural disaster (whether the program is run by an Australian
government agency or another entity).
People whose main residence is accidentally destroyed will be able to access
the main residence exemption to the extent they would have been able to had
their main residence not been destroyed, where they choose to rebuild the dwelling
and then sell the land or dwelling or both without establishing the new dwelling
(and its adjacent land) as their main residence.
"This will remove tax impediments to programs like the Lockyer Valley
Regional Council's land swap program, so flood affected property owners can
get back on track without having to worry about paying capital gains tax on
their original property," the Assistant Treasurer Bill Shorten said.
"Taxpayers will also be able to maintain pre-CGT status on their replacement
asset so they are not disadvantaged in tax terms if they participate in this
type of program," he added.
This measure applies generally to CGT events happening on or after July 1,
2011.
LAWANDTAX-NEWS.COM
