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Edited version of your private ruling
Authorisation Number: 1012500323744
Ruling
Subject: Status of land after the implementation of a new strata plan
Question
Will your land retain its pre-capital gains tax (CGT) status after the implementation of the new strata plan?
Answer
Yes.
This ruling applies for the following periods:
Year ending 30 June 2014
Year ending 30 June 2015
Year ending 30 June 2016
The scheme commences on:
1 July 2013
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.
Prior to 20 September 1985 you acquired unit in NSW.
The unit was acquired under strata title and is an investment property. There are a number of units in the building.
Since the acquisition of the property, you and the other registered proprietors in the building have been using car spaces which are not allotted to the unit titles.
It is proposed to formalise the car parking space arrangement to reflect the use of the car spaces as presently enjoyed by all owners in the building. To facilitate this, it will be necessary for a new strata plan to be registered allocating the car spaces to the units as being used. This will entail a transfer of land being registered on the title to each unit.
Your unit will have no car space allotted to it. The car space area as in the original strata plan is actually part of the footway and garden area.
You will not receive any compensation for the loss of your car space.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-20 and
Income Tax Assessment Act 1997 Section 104-10.
Reasons for decision
Taxation Ruling IT 2505 explains that common property is that part of the strata plan not comprised in any proprietor's lot. Paragraph 4 of IT 2505 explains that in New South Wales the ownership of common property is vested in the body corporate as an agent for the proprietors as tenants in common in proportion to their lot entitlement. The car park area of your building is common property which is owned by all of the unit holders in the building.
When the new strata plan is registered and the car spaces are allotted to the unit holders, each of the four unit holders in the building is in effect disposing of part of their interest in the common property and then most are acquiring another portion of what formerly was the common property.
Where an individual disposes of a capital gains tax (CGT) asset, CGT event A1 happens and either a capital gain or capital loss is made. However, any capital gain or capital loss that you make on the disposal of an asset is disregarded if you acquired the asset prior to 20 September 1985 (pre-CGT).
In your situation, as you acquired the common property that you are disposing of pre-CGT, any capital gain of capital loss that you make at the time of the implementation of the new strata plan is disregarded.
You will not receive an allotted car space and are therefore not acquiring any portion of what was formerly the common property. Therefore, when you sell the property in the future the whole of your interest in the property will retain its pre-CGT status and any capital gain or capital loss that you make will be disregarded.