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Edited version of private ruling
Authorisation Number: 1011481398064
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Ruling
Subject: Capital gains tax - adverse possession - date of acquisition
Question
Did the deceased acquire the property before 20 September 1985?
Answer
No.
This ruling applies for the following period:
Year ended 30 June 2009
The scheme commences on:
1 July 2008
Relevant facts and circumstances
The deceased took possession of a property.
The deceased remained in continuous possession of the property and paid rates for the property.
The deceased applied to have the property registered in their name after the expiration of the 30 year qualification period. The qualification period expired after 20 September 1985.
The deceased's application was accepted, and the deceased became the registered proprietor of the property after 20 September 1985.
The deceased passed away after 20 September 1985.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 109-5(1)
Reasons for decision
For capital gains tax (CGT) purposes you are taken to have acquired a CGT asset when you become its owner. However, the law recognises that in special circumstances title to property can be acquired based on a claim of adverse possession.
In order for the title to property to be acquired by adverse possession, the person claiming title must establish that the time limit on the right of the registered owner to recover possession of the land has expired, and that they satisfy the common law requirement of adverse possession.
Legislation in the state in which the property was located specifically provides that the registered owner's title to the land is not lost by the limitation legislation alone. Rather, when the limitation period has expired, the registered owner is deemed to hold the land on trust for the adverse possessor. The adverse possessor may apply to an order which will transfer the legal title to him or her.
In this situation, the deceased took possession of the property before 20 September 1985. The deceased remained in continuous possession of the property and paid the rates on the property. The deceased applied to the have the property registered in his name after 20 September 1985 when the 30 year expiration period had occurred. The deceased's application was accepted and the deceased became the registered proprietor of the property.
It is our view that while the deceased may have satisfied the common law requirements to establish possessory title of the property, the relevant limitation period was not satisfied until after 20 September 1985. Therefore, for CGT purposes it is considered that deceased acquired the property after 20 September 1985 when the common law requirements had been met, and the expiration period had occurred.
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