Income tax: capital gains: are the totality of rights under a contract considered to be the one asset, or is each right considered to be a separate asset for CGT purposes?

Whether all the rights comprise one single asset, or each right is a separate asset, will depend on the facts of each case. Generally, however, the initial approach will be to regard the totality of rights as the one asset for the purposes of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997.

Depending upon the circumstances of each particular case, an assignment of one of the rights contained in a contract is usually treated as a disposal of part of the asset (i.e. the contractual rights); the individual right that is severed from the contract is, if it continues to exist, regarded as a separate asset for CGT purposes. Note: These views are confined to the subject matter of contracts and arrangements of a similar nature. Example: Widget Ltd grants to Maria the right to market a particular product within Australia. The totality of Maria's rights under the marketing agreement is regarded as a single asset for CGT purposes. Maria assigns to Peter her rights to market the product in Western Australia, South Australia and the Northern Territory. Maria has disposed of part of her asset. The rights acquired by Peter (to market the product in Western Australia, South Australia and the Northern Territory) are a single asset in his hands, separate from the asset Maria continues to own (the rights to market the product elsewhere in Australia, being the rights she did not assign to Peter). Note: The amount received by Maria may be income under ordinary concepts.