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Edited version of private ruling
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Ruling
Subject: Capital gains tax (CGT)
1. Do you disregard any capital gain made on the disposal of your subdivided block of land which was acquired before 20 September 1985?
Yes.
2. Do you disregard any capital gain made on the disposal of your subdivided block of land which was acquired after 20 September 1985?
No.
This ruling applies for the following period
Year ended 30 June 2014
The scheme commenced on
1 July 2010
Relevant facts and circumstances
You acquired your property with your spouse before 20 September 1985.
Your spouse died after 20 September 1985, your spouse's share of property passed to you by joint title rule of survivorship.
Your property has been rezoned into two blocks. House block (block A) and the newly subdivided land (block B).
You will retain block A where your main residence is situated.
You will dispose of block B at the time of subdivision.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-20
Income Tax Assessment Act 1997 Section 104-10(1)
Income Tax Assessment Act 1997 Section 104-10(5)
Income Tax Assessment Act 1997 Section 112-25(1)
Income Tax Assessment Act 1997 Section 112-25(2)
Reasons for decision
Subdivision of land
If you subdivide a block of land, each block that results is registered with a separate title. Subdividing land does not result in a CGT event if you retain ownership of the subdivided blocks.
Where pre-CGT land is subdivided after 19 September 1985, the land will maintain its pre-CGT acquisition date because no CGT event has happened.
In your case, you purchased your land with your spouse before 20 September 1985. Your spouse passed away after 20 September 1985, your spouse's share of the property passed to you.
Inheriting an asset
You inherited the remainder equal share of your property as a joint tenant in accordance with the rule of survivorship. As your late spouse acquired their share of the asset with you before 20 September 1985, you acquired that share of the property at the market value on the date your spouse died.
Disposal of subdivided land with pre and post CGT components
Where an asset is acquired before 20 September 1985, any capital gain or loss you make is disregarded.
Where an asset is acquired after 20 September 1985, any capital gain or loss will be included in the assessable income of the financial year when the CGT event (sale of land) occurred.
In your case, part of the land was acquired before 20 September 1985 under a joint title of the land. That share of the land was acquired pre-CGT and therefore any capital gain or loss on the disposal of that share is disregarded.
Your spouse, who was the other party on the joint-title, died after 20 September 1985. Their 50% share of the property passed to you making you the sole title holder. The date of your spouse's death is the date you acquired the remainder share of the property, this share is therefore acquired post-CGT and will be treated as a post-CGT asset. The market value on your late spouse's date of death is the cost base you will need to use when calculating the capital gain or loss of the post CGT component.