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Edited version of your private ruling
Authorisation Number: 1012230908197
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Ruling
Subject: Capital gains tax - transfer of interest in a property to your relatives
Question 1
Is the capital gain made on the transfer of your interest in the property disregarded?
Answer:
No.
Question 2:
Does the Commissioner have any discretionary powers to disregard the capital gain made on the disposal of the property?
Answer:
No.
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on
1 July 2011
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.
Before 20 September 1985, your parent inherited a property.
The property has always been used by the family as a weekender.
Your parent passed away.
The property was valued at the time of your parent's death.
You and your siblings were the beneficiaries under your parent's will.
You became the owner of an interest in your family's holiday house.
Last year the property was valued at $X, your interest being $y.
You could not afford all the costs incurred in maintaining the property on your current income.
You transferred your interest in the property to your specified relatives for no consideration.
You also paid stamp duty for your relatives.
Your accountant has calculated that you have made a capital gain on the disposal of your interest in the property.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 116-30
Income Tax Assessment Act 1997 Section 116-10
Income Tax Assessment Act 1997 Section 115-5
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.
The most common capital gains tax (CGT) event, CGT event A1 occurs when you dispose of a CGT asset and the time of the event is when you enter into the contract for its disposal or if there is no contract when a change of ownership occurs.
Deceased estate
When a person dies a capital gain or capital loss from a CGT event happening to a CGT asset owned by the deceased just before death, is generally disregarded.
If you acquire an asset owned by a deceased person as their legal personal representative or it passes to you as a beneficiary you are taken to have acquired the asset on the day the person died.
In your case, you acquired your interest in the property.
If the deceased acquired their asset before 20 September 1985, the first element of your cost base is the market value of the asset on the day the person died.
CGT event A1 occurred when you transferred your interest in the property to your relatives.
If you receive no capital proceeds from a CGT event, you are taken to have received the market value of the CGT asset that is the subject of the event, at the time the event occurs.
In your case, you transferred your interest in the property no consideration. Therefore, the market value substitution rule will apply and you will be taken to have disposed of your interest in the property for its market value at the time it was transferred into your relative's names.
As you meet all the necessary criteria you can use the discount method to calculate your capital gain. The discount percentage is 50% for individuals.
The Commissioner does not have any discretionary powers to disregard the capital gain on the disposal of your interest in the property.