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Does a CGT event under Division 104 of the Income Tax Assessment Act 1997 (ITAA 1997) happen to the taxpayer, an investor in a carbon sequestration right, when the landowner sells the land in relation to which the right was created?

No. A CGT event under Division 104 of the ITAA 1997 does not happen to the taxpayer when the landowner sells the land in relation to which the right was created.

The taxpayer acquired the carbon sequestration right, as defined in section 87A of the Conveyancing Act 1919 (NSW) (Conveyancing Act), from the landowner under a contract for 20 years. In the fifth year, the landowner sold the land to another person.

A carbon sequestration right is a forestry right under section 87A of the Conveyancing Act. The forestry right is deemed to be a profit à prendre under section 88AB of the Conveyancing Act.

As a result, even though the ownership of the underlying land changes, no CGT event happens in relation to the carbon sequestration right. As a profit à prendre, it binds the taxpayer and the subsequent landowner.

While a CGT event happens when the landowner disposes of the land, a CGT event does not happen to the taxpayer as there is no disposal of the carbon sequestration right.