Issue
Is the water allocation, as recorded in the taxpayer's water allocation account pursuant to subsection 85(1) of the Water Management Act 2000 (NSW) (WMA 2000), a CGT asset, as defined in section 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997), that is separate from the access licence to which it relates?
Decision
Yes. A water allocation, as recorded in the taxpayer's water allocation account, is a CGT asset, as defined in section 108-5 of the ITAA 1997, that is separate from the access licence to which it relates.
Facts
The taxpayer holds an access licence under section 63 of the WMA 2000. In addition to the access licence, the taxpayer has a water allocation which is recorded in the water allocation account under subsection 85(1) of the WMA 2000 for that licence.
Reasons for Decision
Under subsection 56(1) of the WMA 2000, an access licence entitles its holder to take water, subject to the specifications applicable to that licence. This entitlement is a statutory right and the licence falls within the definition of 'CGT asset' in subsection 108-5(1) of the ITAA 1997.
The Dictionary in the WMA 2000 defines 'water allocation' to mean the water to which the holder of an access licence is entitled from time to time under the licence, as recorded pursuant to subsection 85(1) of the WMA 2000 on the account for the licence. Under subsection 85(1A) of the WMA 2000, a water allocation is credited to an access licence in accordance with any relevant 'available water determination'.
An 'available water determination' is a determination under subsection 59(1) of the WMA 2000 as to the availability of water for various categories of access licence, in relation to one or more water management areas or water sources. The allocation is also transferable from one access licence to another pursuant to section 71G of the WMA 2000. A water allocation is distinct from the share and extraction components of an access licence. The share and extraction components are specified in subsection 56(1) of the WMA 2000.
The water allocation is a statutory right. It falls within the definition of CGT asset in subsection 108-5(1) of the ITAA 1997. The water allocation is a separate CGT asset from the access licence.