Edited version of private advice

Authorisation Number: 1051895006184

Date of advice: 23 November 2021

Ruling

Subject: Capital gains tax

Question 1

For the purposes of Parts 3-1 and 3-3 of the ITAA 1997, did the deceased acquire the property when they obtained possessory title to the property by adverse possession?

Answer

Yes, the deceased did acquire the property when they obtained possessory title to the property by adverse possession.

Question 2

Is the first element of the deceased's cost base and reduced costs base of the property the market value of the property on the date of acquisition as the market value substitution modification applies?

Answer

Yes, the first element of the deceased's costs base and reduced costs base of the property is the market value on the date of acquisition.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Several decades ago, the deceased took possession of a derelict property and occupied it as their residence.

The deceased obtained possessory title to the property by adverse possession, after years of continuous possession.

Over a decade later the property was rented to the deceased's child for a nominal amount.

A few years later, the deceased applied to the relevant Land office for title by adverse possession.

The deceased rented the property out until they passed away, at which point it formed part of their estate.

No rent has been declared and no expenses claimed as a deduction and it was not the main residence of the deceased.

Probate was granted in the year after the deceased passed away.

The deceased's partner is the sole beneficiary of the estate.

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 112-20

Income Tax Assessment Act 1997 section 128-15

Income Tax Assessment Act 1997 section 995-1