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Edited version of your written advice
Authorisation Number: 1051220846498
Date of Advice: 3 May 2017
Ruling
Question
Will there be a capital gains tax (CGT) consequence on the disposal of the property in relation to the interest in the property you acquired from your deceased spouse?
Answer
Yes
This ruling applies for the following period:
Year ending 30 June 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
You and your spouse acquired a property before 20 September 1985 as joint tenants, which you used to produce assessable income.
Your spouse died after 20 September 1985, at which time your spouse's ownership interest passed to you as joint tenant.
You sold the property on DDMMYYYY.
Relevant legislative provisions
Income Tax Assessment Act 1997 Division 128
Income Tax Assessment Act 1997 section 128-50
Income Tax Assessment Act 1997 subsection 128-15(5)
Reasons for decision
Section 128-50 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that if you own interests a dwelling as joint tenants and the one joint tenant dies, on that date their interest in the asset is taken to pass in equal shares to you and any other surviving joint tenants, as if their interest is an asset of their deceased estate and you are beneficiaries.
Under Division 128 of the ITAA 1997 when a person dies a capital gain or capital loss from a CGT event that results from a CGT asset the person owned just before dying is disregarded.
Any subsequent disposal by the surviving joint tenant is a CGT event which will result in a capital gain or loss.
In accordance with subsection 128-50(4) of the ITAA 1997, if the individual who died acquired his or her interest in the asset before 20 September 1985, the first element of the cost base of the interest each survivor is taken to have acquired is:
*Market value of the interest of the individual who died (worked out on the day the individual died) Number of survivors |
In your case, you are taken to have acquired your spouse's ownership interest in the property on the date of their death. As you are the only surviving joint tenant, the first element of the property's cost base will be the market value of their ownership interest in the property on the day they died. Any capital gain or capital loss made when the asset passed to you as the surviving joint tenant is disregarded.
On the subsequent disposal of the property, CGT event A1 will trigger which will result in a capital gain or capital loss. The property will be considered to be two separate CGT assets. One being your existing ownership interest, which is pre-CGT and the other being the ownership interest acquired from your deceased spouse. The first element of cost base of the ownership interest acquired from your deceased spouse will be market value of their ownership interest on the day of their death.