ATO Interpretative Decision
ATO ID 2002/1109 (Withdrawn)
Income Tax
Capital gains tax - CGT asset - part of an asset.FOI status: may be released
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This ATOID is withdrawn as it is a simple restatement of the law and does not contain an interpretative decision.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
When a CGT asset is sold in a single transaction or dealing, can the capital gains tax consequences of the sale be worked out by treating CGT event A1 in section 104-10 of the Income Tax Assessment Act 1997 as happening separately to part ownership interests in the asset?
Decision
No. Where an asset is sold in a single transaction, CGT event A1 in section 104-10 of the ITAA 1997 happens once only, in respect of the whole asset.
Facts
An individual acquired an asset on or after 20 September 1985 and before 11.45 am (by legal time in the ACT) on 21 September 1999.
After 12 months the asset is sold in a single transaction.
The individual would like to treat the transaction as a disposal of two separate assets and use cost base indexation to calculate the capital gain from one asset and the CGT discount in respect of the other asset.
Reasons for Decision
CGT event A1 in section 104-10 of the ITAA 1997 happens if a CGT asset is disposed of. That is, a change of ownership occurs from one entity to another entity.
CGT asset is defined in section 108-5 of the ITAA 1997 to include part of, or an interest in, an asset. Therefore, where A and B become part owners of an asset previously owned by A alone, there is a disposal of a part of the CGT asset from A to B.
However, the capital gains tax provisions will only apply to parts of assets, or interests in assets, where they have that legal character, or are dealt with as such.
This means that if an undivided interest in an asset is sold by one entity to another entity CGT event A1 happens only once. The capital gain for the event is worked out by comparing the cost base of the asset with the capital proceeds for its disposal. The capital gain is worked out by applying the CGT discount or cost base indexation (if the relevant conditions are satisfied).
Date of decision: 3 September 2002Year of income: Year ended 30 June 2002
Legislative References:
Income Tax Assessment Act 1997
section 104-10
section 108-5
Keywords
Capital gains tax
CGT asset
CGT cost base
CGT separate assets
CGT discount
CGT frozen indexed cost base
CGT indexation
ISSN: 1445-2782
| Date: | Version: | |
| 3 September 2002 | Original statement | |
| You are here | 12 March 2010 | Archived |