Edited version of private advice

Authorisation Number: 1052124303237

Date of advice: 30 May 2023

Ruling

Subject: Pre-CGT asset

Issues

Question

Did the Taxpayers acquire the Property before 20 September 1985 pursuant to section 109-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes

This ruling applies for the following periods:

1 July XXXX to 30 June XXXX

Relevant facts and circumstances

The Taxpayers are the registered proprietors of the Property.

The contract for sale, pursuant to which the Taxpayers became the registered proprietors of the Property, is signed by the parties but undated.

The contract for sale sets out the vendors were Individuals A, B, C and D and the purchaser was Entity A - replaced with the Taxpayers.

The Taxpayer's statutory declaration, made on XXXX, provides that pre-20 September 1985 Entity A entered into the contract for the purchase of the Property, but Entity A nominated the Taxpayers as substitute purchasers to complete the contract.

Entity A was controlled by the Taxpayers.

The contract for sale uses the standard contract published by the relevant State, indicating that it is a pre-20 September 1985 version.

The contract for sale includes the vendor's statement to the purchaser pursuant to relevant legislation which requires the vendor to give to the purchaser, before the purchaser signs the contract, a signed statement by the vendor that contains the matters and attaches the documents specified.

Amongst other things, the statement requires:

• Details relating to outgoings, being information concerning rates, taxes, charges or similar outgoings (including any body corporate charges).

The vendor's statement indicates that outgoings did not exceed $X for a pre 20 September 1985 period. The statutory declaration by the purchaser provides that attached to the vendor's statement are the vendor's land, water and sewerage notices as they related to a pre-20 September 1985 period.

• Documents relating to title.

The vendor's statement enclosed copies of the certificate of title and caveat attached to the Property stamped pre-20 September 1985.

The vendors' solicitor in the contract for sale was renamed in pre 20 September 1985 to its current name.

Settlement took place post 20 September 1985.

The Taxpayer's statutory declaration provides that the delay between signing the contract and settlement, well beyond the anticipated period, was due to a special condition in the contract of sale, which placed obligations on an unrelated party.

The vendor's statutory declaration, made on XXXX, confirms that pre-20 September 1985 Entity A entered into the contract for the purchase of the Property but nominated the Taxpayers as substitute purchasers to complete the contract.

The vendors and purchasers are unrelated parties.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 109-5

Reasons for decision

Question

Summary

The property is a pre-CGT asset.

Detailed reasoning

Subsection 109-5(1) of the ITAA 1997 provides that you acquire a CGT asset when you become its owner and the time when you acquire the asset is when you become its owner. Subsection 109-5(2) of the ITAA 1997 has specific rules for the circumstances in which, and at the time in which, you acquire a CGT asset as a result of a CGT event happening.

The Property is a CGT asset (section 108-5 of the ITAA 1997).

'Acquire' is defined in section 995-1 of the ITAA 1997 to mean:

(a)  a CGT asset: you acquire a CGT asset (in its capacity as a CGT asset) in the circumstances and at the time worked out under Division 109 (including a provision listed in Subdivision 109-B): ...

Relevantly, under subsection 104-10(1) of the ITAA 1997, CGT event A1 happens when an entity disposes of a CGT asset. Under subsection 104-10(2) of the ITAA 1997, an entity disposes of a CGT asset when a change of ownership occurs from that entity to another entity. In respect of the sale of a CGT asset, the time of the event is when the parties enter into in the contract for the disposal of the asset.

The Taxpayers have provided a signed but undated copy of the contract of sale for the Property. However, the Taxpayers provided the following background and documentation to support their statement that the contract was signed in November/December 1984 - including:

•         statutory declarations by the purchaser and the vendor;

•         the contract of sale uses a pre-CGT template; and

•         the contract for sale includes the vendor's statement to the purchaser pursuant to the relevant legislation and the required statements and documents relate to periods prior to 1985.

The affidavits and documents provided, and surrounding circumstances, is sufficient to accept that the contract was signed before the 20 September 1985.

Consequently, pursuant to the application of section 104-10 for the purposes of section 109-5 of the ITAA 1997, the Property is a pre-CGT asset for the purposes of Part 3-1 of the ITAA 1997.