Edited version of private advice

Authorisation Number: 1051805053331

Date of advice: 26 April 2021

Ruling

Subject: CGT - deceased estate

Question 1

Is your date of acquisition the date of your parent's death?

Answer

Yes. There is a special rule that applies to the inheritance of an asset that a person owned when they died. A beneficiary acquires the asset on the day the person died. In your case this will be date your parent passed away.

Question 2

Is your starting cost base a reasonable apportionment of the market value of the property at xx x 20xx?

Answer

Yes. There is a special rule that applies if the deceased person acquired the asset before 20 September 1985, the first element of your cost base and reduced cost base is the market value of the asset on the day the person died. In your case this will be xx x 20xx.

The subdivision split the property in two. Both new blocks have an acquisition date of xx x 20xx and share the cost base that the property had just before the subdivision.

Taxation Determination TD 97/3 contains guidelines on how to apportion the cost base of the property on a reasonable basis.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts

Your parents acquired a property prior to 20 September 1985. (the property)

The land was subdivided into a number of lots and one lot sold.

The house remained as it had been and the other vacant lot without the house remained vacant throughout your parent's life.

The remaining lot was vacant.

Your parents separated prior to 20 September 1985 and your parent subsequently obtained full ownership of the remaining lots.

You and your family resided with your parent for a number of years.

Your parent resided at the property until they passed away in 2XXX.

You and your family began building a family home on the vacant block of land with an occupancy certificate being granted in 20XX.

Your parent left a portion of their total land of which did not contain a house.

Your parent left the whole vacant lot to you which was one third of their land.

You were the executor of your parent's estate.

A boundary realignment was done pursuant to your parent's will to incorporate the portion of total land into the vacant lot. This was undertaken in 20XX and registered a short time later.

Your parent's estate incurred costs to realign the boundaries of around $x, which were paid using estate rental income.

Your parent's estate used your parent's former main residence to produce income during the number of years it took to complete the boundary realignment.

You decided that the block that contains your main residence was too big and around 20xx as a result you subdivided the lot into x lots.

You sold the now subdivided lot that did not contain your main residence with settlement occurring in 20XX.

You have estimated subdivision costs at about $xx in relation to the final subdivision before sale of vacant land.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 102-20

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 112-25

Income Tax Assessment Act 1997 section 118-165

Income Tax Assessment Act 1997 section 128-15

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