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Edited version of your private ruling
Authorisation Number: 1012591464398
Ruling
Subject: Capital gains tax (CGT) - acquisition date of property
Question:
Can you use the discount method to calculate your capital gain you made on the disposal of your property?
Answer:
No.
This ruling applies for the following period
Year ended 30 June 2013
The scheme commences on
1 July 2012
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.
After 20 September 1985, you and your spouse signed a contract for the purchase a property in your company's name.
The holding deposit was paid from you and your spouse's personal bank account.
You and your spouse applied for finance through your financial institution under your business name during the cooling off period, but your request was rejected.
You and your spouse wrote to your solicitor requesting they notify the vendor to terminate the contract.
Your solicitor notified you and your spouse a week later that they had been away and had not picked up their mail.
As a result you and spouse were in a binding unconditional contract as your solicitor had not exercised your right to terminate the contract within the cooling off period.
You and your spouse approached your financial institution again. The financial institution agreed to finance the purchase of the property in your own names not your business name.
You and your spouse paid the remainder of the deposit from your personal bank account.
The vendor's solicitor re-issued the contract for sale with the name changes with a revised contract date.
Approximately X months later you and your spouse disposed of the property.
You have provided the documentation to support your application and this documentation is to be read with and forms part of your application for the purpose of this ruling.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 109-5
Income Tax Assessment Act 1997 Section 115-10
Income Tax Assessment Act 1997 Section 115-20
Income Tax Assessment Act 1997 Section 115-25
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 an asset to someone else.
CGT event A1 occurred when you and your spouse disposed of the property.
Generally, you acquire a CGT asset when you become its owner. If you acquire an asset because of a CGT event, you are generally taken to have acquired the asset at the time of the CGT event. For example, if you enter into a contract to purchase a CGT asset, such as a dwelling, the time of acquisition is when you enter into the contract, or if there is no contact, when the change of ownership occurs.
The contract you and your spouse signed on a specified date, in your company's name became null and void when you and your spouse were not able to proceed with its acquisition due to not being able to obtain finance.
You and your spouse became the joint owners of the property on the date you both signed the new contract for sale drawn up by the vendor's solicitor.
Discount method
You can use the discount method to calculate your capital gain if:
· you are an individual
· a CGT event happens to an asset you own
· the CGT event happened after 21 September 1999
· you acquired the asset at least 12 months before the CGT event, and'
· you did not choose to use the discount method.
As you and your spouse have not owned the property for at least 12 months you do not qualify to calculate your capital gain using the discount method.
'Other' method
You must use the 'other' method to calculate your capital gain if you brought or disposed of your asset within 12 months. Generally, to use the 'other' method, you simply subtract your cost base (what the asset cost you) from your capital proceeds (how much you disposed of it for). The amount of the proceeds left is your capital gain.
Therefore, you will need to use the 'other' method to calculate your capital gain.