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Edited version of private ruling
Authorisation Number: 1011849232598
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Ruling
Subject: Capital gains tax - disposal of investment property
Question:
Is the capital gain made on the disposal of your investment property where you disposed of it due to your inability to work as a result of an accident disregarded?
Answer:
No.
This ruling applies for the following period
Year ended 30 June 2009
The scheme commenced on
1 July 2008
Relevant facts
You owned a property that contained two residential dwellings (property A and property B).
You moved into property A and established it as your main residence.
Property B was used solely for income producing purposes.
In 20XX you were injured in an accident and you were unable to work for more than 12 months.
You had to dispose of property B to meet the loan repayments on property A.
You included a net capital gain in your 200X-0X income tax return.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 118-110
Reasons for decision
The most common capital gains tax (CGT) event is a CGT event A1 which occurs when you dispose of a CGT asset. The time of the event is when you enter into the contract for the disposal or if there is no contract - when the change of ownership occurs.
A CGT event A1 occurred when you disposed of property B.
In your case, you made the decision to dispose of property B to meet your loan repayments on property A. You made this decision based on your financial situation caused by your inability to work due to your accident.
There are no exemptions available to you such as the main residence exemption, as property B has never been your main residence and it has always been used solely for income producing purposes.
We acknowledge that you were under financial hardship as a result of your accident and your inability to work, but the Commissioner does not have any discretionary powers to disregard the capital gain made on the disposal of property B.
Therefore, you have correctly included the capital gain made on the disposal of property B in your 2008-09 income tax return.