Issue
Did the taxpayer, a hotelier, acquire poker machine rights for the purposes of section 160U of the Income Tax Assessment Act 1936 (ITAA 1936) at the time they were granted in 1997 under the Liquor Act 1982 (NSW) (LA 1982)?
Decision
Yes. The taxpayer acquired the poker machine rights for the purposes of section 160U of the ITAA 1936 at the time they were granted in 1997 under the LA 1982.
Facts
The taxpayer, a hotelier, was granted poker machine rights under the LA 1982 in 1997. The rights were not acquired pursuant to a contract.
The LA 1982 was replaced by the Gaming Machines Act 2001 (NSW) (GMA 2001). The taxpayer's rights under the LA 1982 were carried over to the GMA 2001 as poker machine entitlements. The taxpayer sold the poker machine entitlements in 2003.
Reasons for Decision
Legal rights fall within the definition of 'CGT asset' at subsection 108-5(1) of the Income Tax Assessment Act 1997 . This is consistent with the position under paragraph 160A(a) of the ITAA 1936. Poker machine rights are therefore CGT assets.
The rights pertaining to each approved poker machine, kept in a hotel, for which a poker machine entitlement was allocated, were effectively carried over from the LA 1982 to the GMA 2001. This was facilitated by paragraph 15(1)(a) and the savings provisions in Schedule 1 of the GMA 2001.
The poker machine rights created in 1997 under the LA 1982 were covered by subsection 160M(6) of the ITAA 1936 because they were not a form of corporeal property and vested in the taxpayer on their creation. Under paragraph 160M(6B)(a) of the ITAA 1936, the taxpayer acquired those rights at the time applicable under subparagraph 160U(6)(b)(i) of the ITAA 1936.
As a result of the interaction between subparagraph 160U(6)(b)(i) and paragraph 160M(6)(b) of the ITAA 1936, the time that the poker machine rights were acquired was the time at which they were granted to the taxpayer in 1997 under the LA 1982. Note: Paragraph 15(1)(a) of the GMA 2001 has been repealed by the Clubs, Liquor and Gaming Machines Legislation Amendment Act 2011. This repeal does not have any impact on the outcome of this ATO ID.
Amendment History
Date of amendment Part Comment 11 August 2017 Reasons for Decision Added Note regarding repeal of Paragraph 15(1)(a) of the GMA 2001. 4 July 2014 Related ATO Interpretative Decisions Remove reference to withdrawn ATO IDs 2003/47 and 2002/785.
Date of amendment | Part | Comment
11 August 2017 | Reasons for Decision | Added Note regarding repeal of Paragraph 15(1)(a) of the GMA 2001.
4 July 2014 | Related ATO Interpretative Decisions | Remove reference to withdrawn ATO IDs 2003/47 and 2002/785.