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Edited version of private ruling
Authorisation Number: 1011601829373
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Ruling
Subject: Capital gains tax (CGT)
Can any capital gain on the sale of your land be disregarded under section 104-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Yes.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You purchased a block of land for which you signed the contract prior to 20 September 1985.
The contract states it was made prior to 20 September 1985.
You have a copy of a letter sent by your solicitor dated prior to September 1985. The letter states they have received the original contract of sale and have initiated searches on the title and other actions associated with the purchase of the property.
You are unsure of the date the vendor signed the contract.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 104-10.
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Subsection 100-25(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that CGT events involving assets acquired before 20 September 1985 are not CGT assets.
Subsection 104-10(5) of the ITAA 1997 provides that a capital gain or capital loss that a taxpayer makes on the disposal of a CGT asset is disregarded if they acquired the asset before 20 September 1985.
A CGT event A1 under subsection 104-10(1) of the ITAA 1997 happens if a taxpayer disposes of a CGT asset. A CGT asset includes any kind of property, or legal or equitable right that is not property.
Acquisition or disposal under a contract
In general, a disposal and acquisition are constituted by a change in ownership. However, if that change of ownership occurs pursuant to a contract, the acquisition and disposal is said to have taken place at the time of the making of the contract, irrespective of when the change in ownership actually occurred.
For example:
Contract for the sale of land is entered into on 1 July 1993, but the sale is not completed by settlement until 1 September 1993. For CGT purposes, the change in ownership constitutes a disposal and acquisition which are treated as having occurred on 1 July 1993.
In your case, your contract is dated prior to 20 September 1985 and your solicitor had received it and initiated action for the purchase of the land prior to 20 September 1985. Therefore, as the contract for the land was made prior to 20 September 1985, any capital gain or capital loss is disregarded.