Edited version of private advice

Authorisation Number: 1052332492750

Date of advice: 19 November 2024

Ruling

Subject: CGT - cost base

Question

Is the cost base for the calculation of your capital gains tax the date your Sibling passed away on XX XX 20XX according to Income tax Assessment Act 1997 section 110-25?

Answer

Yes

This private ruling applies for the following period:

Period ended XX XX 20XX

The scheme commenced on:

XX XX 20XX

Relevant facts and circumstances

You inherited a property (the property).

The property has been in the family since 18XX.

The property was Initially owned by Person A (who died in 18XX).

It then passed to Person B, the child of Person A (who died DDMM19XX).

The property then passed to Person C, who inherited it in 19XX on the death of their parent, Person B.

Person C passed away on XX XX 19XX - this is the first post-CGT 20 September 1985 event.

The property then passed to you, your siblings in equal shares.

Your sibling A bought out your share and your sibling B share in the property, making them sole owner.

At that time the property was valued at $XX,000 and you and your sibling B were paid $XX,000 each.

The property was rented out from 19XX to 19XX.

On XX XX 19XX your sibling A moved into the property, and it became their principal place of residence.

They died on XX XX 20XX and left no family other than you and your sibling B to inherit the property.

Both you and your sibling B were in your sibling A's will and inherited a number of properties.

You and your sibling B agreed that you would take ownership of the property exclusively and that your sibling B would inherit other property or properties.

At that time the property was valued at $XXX,000, being valued by a trust company who had managed your sibling A's affairs.

It took you approximately 6 months to remove your sibling A's belongings and prepare it for tenants to occupy.

Various repairs and maintenance were carried out on the property while it was rented out, including a new wastewater treatment system to replace the existing septic system, as was required by the City Council.

In 20XX you were contacted by Transport and Main Roads Dept (TMR) and told the property would be compulsorily acquired as part of the project to duplicate the Railway line between XXXX and XXXX.

An interview was held at that time, but nothing further happened until 20XX.

The elderly tenants had died so you applied for a 'strategic purchase' (by asking TMR to purchase it as soon as possible) rather than waiting until you were served with notice of their intention to acquire.

The contract for the purchase of the property was signed on XX XX 20XX and the purchase was completed (settled) on XX XX 20XX.

The agreed value at that time was $XXX,000.00.

An allowance for purchase of replacement property was $XX,000.00.

The consultant's costs were $XX,000.00.

The total was $XXX,000.00.

The agreed purchase price for the property was $YYY,000.00, plus rates adjustment of $XXX.00.

You decided not to purchase a replacement property after you were paid out by TMR on a compulsory purchase sale due to your age and because you were planning for your future costs for aged care, having reached XX years of age.

You spoke to your accountant as they prepared your 20XX-20XX Income Tax Return.

They indicated that the capital gains tax would be calculated using the value of the property when your sibling A, sibling B and you inherited it from your parent in 19XX.

As you did not hold an interest in the property from 19XX to the death of your sibling A on XX XX 20XX, you felt that your cost base should be the market value of the property when your sibling A passed away and you once again inherited the property.

Application to your circumstances

The asset was acquired by the deceased after 20 September 1985

If the deceased acquired the asset on or after 20 September 1985, the first element of your cost base is generally what the deceased's cost base for the asset was on the day they died.

The first element of your cost base is the market value of the asset on the day the deceased died if the asset either:

•                     is a property that passed to you after 20 August 1996 (but not as a joint tenant), and just before the deceased died it was their main residence and was not being used to produce income, or

•                     passed to you as the trustee of a special disability trust.

In your case you inherited a property from your sibling A and the cost base is therefore the date that they passed away.

As a beneficiary, you can include in your cost base (and reduced cost base) any expenditure a legal personal representative (LPR) would have included in their cost base if they had sold the asset instead of distributing it to you.

The date you incurred the expenditure is the date the LPR would have incurred it.

Relevant legislative provisions

Income tax Assessment Act 1997 section 110-25

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