Issue
Is a carbon sequestration right, as defined in section 87A of the Conveyancing Act 1919 (NSW) (the Conveyancing Act), a CGT asset, as defined in section 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. A carbon sequestration right, as defined in section 87A of the Conveyancing Act, is a CGT asset, as defined in section 108-5 of the ITAA 1997.
Facts
A taxpayer enters into a contract with a New South Wales landowner for the acquisition of a carbon sequestration right as defined in section 87A of the Conveyancing Act.
Reasons for Decision
Subsection 108-5(1) of the ITAA 1997 defines a CGT asset as: (a) any kind of property; or (b) a legal or equitable right that is not property.
A carbon sequestration right is defined in section 87A of the Conveyancing Act as follows: carbon sequestration right in relation to land, means a right conferred on a person by agreement or otherwise to the legal, commercial or other benefit (whether present or future) of carbon sequestration by any existing or future tree or forest on the land after 1990.
A carbon sequestration right is thus a legal right and falls within the definition of CGT asset in subsection 108-5(1) of the ITAA 1997. [Note: The same principle applies to all statutory carbon sequestration rights under the legislation applying in the various Australian States.]