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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your written advice

Authorisation Number: 1051251099090

Date of advice: 13 July 2017

Ruling

Subject: Capital Gains Tax

Question 1

Will capital gains or losses from the sale of your property in Country X be disregarded?

Answer

Yes.

Question 2

Will the capital improvements made to the property after 20 September 1985 be considered to be a separate CGT asset?

Answer

No.

This ruling applies for the following period(s)

Year ended 30 June 2018

The scheme commences on

1 July 2017

Relevant facts and circumstances

You were gifted a property located in Country X in March 1984 from your parent.

You owned this property alone.

You intend to sell this property in the 2018 financial year.

You made capital improvements to the property after 19 September 1985

The cost of the improvements made to the property will be less than 5% of the capital proceeds from the disposal of the property.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 102-20

Income Tax Assessment Act 1997 section 104-10(5)

Income Tax Assessment Act 1997 section 108-70

Reasons for decision

Question 1

A capital gain or capital loss is made when a capital gains tax (CGT) event happens to a CGT asset you own.

The most common event is CGT event A1 which happens when a person disposes of a CGT asset to someone else. This includes when a person sells a property.

The CGT regime started on 20 September 1985. If property was acquired before this date then any gains or losses from the sale of that property will be disregarded.

In your case you were gifted the property in 1984. Since you acquired the property before 20 September 1985, any capital gains or losses on the sale of the property will be disregarded.

Question 2

A capital improvement to a CGT asset that was acquired before 20 September 1985 is taken to be a separate CGT asset if its cost base when a CGT event happens in relation to the original asset is:

You have stated that the cost base of the improvements will not be more than 5% of the capital proceeds from the CGT event in relation to the disposal of the property.

Therefore the capital improvements will not be considered a separate CGT asset and will not be subject to capital gains tax.

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