Edited version of private advice

Authorisation Number: 1051842640627

Date of advice: 27 May 2021

Ruling

Subject: CGT - disposal

Question

Are you liable to paycapital gains tax on the capital gain you made on disposal of your ownership interest in the apartment?

Answer

Yes

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

On DD/MM/YYYY your parent gifted a half interest in an apartment (the property) to you and your siblings in equal shares.

Your parent passed away in YYYY.

In the year ended June YYYY, you and your siblings disposed of your respective ownership interests in the property.

You made a capital gain from the disposal of your ownership interest in the property.

The property was not used to produce assessable income during your ownership period.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 100-25.

Income Tax Assessment Act 1997 section 102-5.

Income Tax Assessment Act 1997 section 104-10.

Income Tax Assessment Act 1997 section 108-5.

Income Tax Assessment Act 1997 paragraph 112-20(1)(a).

Reasons for decision

Sections 100-25 and 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997) define what a capital gains tax (CGT) asset is. Subsection 100-25(2) of the ITAA 1997 provides that the definition of a CGT asset includes land and buildings. Paragraph 108-5(2)(a) of the ITAA 97 clarifies that a CGT asset also includes part of or an interest in property. Applying this definition to your circumstances, the ownership interest that you held in the property is a CGT asset.

Paragraph 112-20(1)(a) of the ITAA 1997 provides that, where you do not incur expenditure to acquire a CGT asset, you are taken to have acquired it for its market value at the time of acquisition. You received your ownership interest in the property as a gift. Therefore, for CGT purposes, you are taken to have acquired your interest in the property for its market value on the date that your mother gifted the property to you. As you acquired the property from your mother as a gift prior to her passing, and not as part of her estate, your mother's passing does not affect the CGT implications on the disposal of your ownership interest in the property.

CGT event A1 occurs when you dispose of a CGT asset (section 104-10 of the ITAA 1997). The timing of CGT event A1 is either when you entered into the contract for disposal or, if there was no contract for disposal, when the change of ownership occurs. CGT event A1 occurred when you disposed of your ownership interest in the property in the income year ended 30 June YYYY.

You make a capital gain from CGT event A1 where the capital proceeds from the disposal are more than the CGT asset's cost base. In your circumstances, you have made a capital gain. Under section 102-5 of the ITAA 1997, you must include in your assessable income your net capital gain for the income year ended 30 June YYYY.