Edited version of private advice

Authorisation Number: 1052145011581

Date of advice: 28 July 2023

Ruling

Subject: CGT - cost base

Question 1

For the purposes of Division 115 of the Income Tax Assessment Act 1997 (ITAA 1997) (about discount capital gains) are you taken to have acquired the Property when the third deceased acquired the asset?

Answer

Yes.

You inherited a share of the property via a deceased estate. While legal title was not transferred to you until sometime after the deceased died, item 4 in the table in section 115-30 of the ITAA 1997 provides that several sections in Division 115 of the ITAA 1997 are applied as if you acquired the Property on the date the third deceased acquired the asset.

Question 2

Does section 128-15 of the ITAA 1997 apply such that the first element of the cost base in respect of your interest in the Property is the market value of the Property on the day the second deceased passed away plus any other cost base elements the third deceased may have included in their cost base?

Answer

Yes.

The second deceased acquired their first interest in the property when they purchased the property as joint tenants with the first deceased after 1985. The second deceased acquired their second interest in the property through joint tenancy survivorship when the first deceased died. Under section 128-50 of the ITAA 1997 the second deceased is taken to have acquired the second interest on the day the first deceased died, and the first element of cost base is equal to the first deceased's cost base.

The third deceased acquired their interest in the property when the second deceased died. The property was the second deceased's main residence just before they died. The second deceased's cost base is determined by item 3 in the table in section 128-15 of the ITAA 1997 and is the market value of the third deceased's interest in the dwelling on the day the second deceased died.

You acquired your interest in the property when the third deceased died. The property was not their main residence when they died. The first element of your cost base is the cost base of the third deceased's interest in the asset on the day they died (item 1 in the table in section 128-15 of the ITAA 1997). As noted above the first element of the third deceased's cost base will be the market value of the asset on the day the second deceased died. If the third deceased had any additional elements to include in their cost base these will also be included in the first element of your cost base.

This private ruling applies for the following period:

Year ended 20XX.

The scheme commenced on:

1 July 20XX.

Relevant facts and circumstances

The Property was the main residence of the first and second deceased as joint tenants.

The Land Titles Office show the transfer of the Property into their names as the transferees on a date after 1985 by the Director of Housing.

You were married to the first and second deceased's child.

The first deceased passed away some time later.

The second deceased passed away some time after the first deceased.

The Property passed to the third deceased (your spouse) and their sibling, as tenants in common, as stipulated in the will of the second deceased.

The third deceased's sibling is your sibling-in-law, of whom you are estranged.

The siblings' children began occupying the Property rent free. This commenced soon after the second deceased died, however the exact date is unknown.

The third deceased passed away about ten years ago.

Letters of Administration of the third deceased's 50% share of the Property was granted to you about nine months later.

The registration of the transfer of their share of the Property into your name was not completed for another three years, which confirmed you and the sibling were tenants in common of the Property.

Very soon after registration of title, you advised the sibling that you wanted to sell the Property.

Your Solicitor then advised the sibling of your wishes to sell the Property. They outlined to them that they will proceed with legal action should they receive no response within 14 days.

The following day, your Solicitors received a letter from the sibling's solicitors stating they had been hospitalised with no further information to be provided.

Six months later, your Solicitors sent a letter to the sibling's lawyers advising their intention to proceed with legal action and will seek an order to sell the Property.

The Property was sold in 2021.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 115-30

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