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Ruling
Subject: Capital gains tax - pre-CGT
Question
Is your entire property exempt from capital gains tax (CGT) under paragraph 104-10(5)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Advice
No
This ruling applies for the following period:
Year ending 30 June 2013
The scheme commenced on:
1 July 2012
Relevant facts and circumstances
You purchased a property with your spouse as joint tenants prior to 20 September 1985.
Your spouse subsequently died after 20 September 1985. As you were joint tenants, you became sole owner of the property.
You now intend to sell the property.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10(5)(a)
Income Tax Assessment Act 1997 Section 108-5
Income Tax Assessment Act 1997 Section 128-50
Reasons for decision
For CGT purposes, if you are a joint tenant you are treated as if you are a tenant in common owning equal shares in the asset (section 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997)). However, if you are a joint tenant and another joint tenant dies, on that date their interest in the asset is taken to pass in equal shares to you and any other surviving joint tenants, as if their interest is an asset of their deceased estate and you are beneficiaries (section 128-50 of the ITAA 1997).
A capital gain on the disposal of an asset can be disregarded under paragraph 104-10(5)(a) of the ITAA 1997 if it was acquired prior to 20 September 1985.
In your case you purchased a property prior to 20 September 1985 as joint tenants with your spouse. In accordance with section 128-50 of the ITAA 1997, on the date of their death you were taken to have acquired their interest in the property.
As the 50% portion of the property that you acquired for CGT purposes following your spouse's death is taken to have been acquired after 20 September 1985, it will not be exempt from CGT under paragraph 104-10(5)(a).
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