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Edited version of your written advice
Authorisation Number: 1012824093081
Date of advice: 16 June 2015
Ruling
Subject: CGT - disposal
Question 1
Will the proceeds from the sale of the property be subject to capital gains tax?
Answer
Yes
This ruling applies for the following period
Year ending 30 June 2015
Year ending 30 June 2016
The scheme commences on
1 July 2014
Relevant facts and circumstances
You are a company and you acquired a property (the property) after 20 September 1985.
The property consisted of a house and land at the time of purchase.
You demolished the house and built two dwellings on the property in 20XX.
A and B are your only shareholders.
The property is to be sold and the company wound up.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 108-5
Income Tax Assessment Act 1997 section 104-10
Reasons for decision
A capital gain or a capital loss may arise if a capital gains tax event (CGT event) happens to a capital gain tax asset (CGT asset). Section 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a CGT asset is any kind of property, or a legal or equitable right that is not property.
CGT event A1 occurs when you dispose of a CGT asset. You are considered to have disposed of a CGT asset if a change of ownership occurs from you to another entity because of some act or event or by operation of law. The capital gain or capital loss is made at the time of the event (section 104-10 of the ITAA 1997).
In your case, the property would be considered a CGT asset. CGT event A1 occurs on the date the contract of sale for the property is signed. A capital gain or loss is made at that time.
Your net capital gain is included in your assessable income for the year in which the CGT event occurs and will be taxed at the current company tax rate.