Private ruling: Acquisition date of CGT asset
Published: May 2012
Ruling period: Year ending 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: For the purposes of the capital gains tax (CGT) provisions, was the commercial property held by the deceased estate acquired by deceased prior to 20 September 1985? | A1: No

Relevant facts and circumstances: The deceased left a commercial property to the beneficiaries of his estate. This property has subsequently been sold by the beneficiaries. When the deceased originally purchased the property, there was no contract for sale prepared or signed. The following information is provided in relation to the negotiations and agreements surrounding the original acquisition of the property: An initial letter was sent to the deceased from the vendor prior to 20 September 1985. It stated that the vendor was endeavouring to have the land subdivided so that the title could be passed to him. The letter advised that this could only be achieved on the basis of a strata title arrangement. A second letter was sent to the deceased from the vendor prior to 20 September 1985. It stated that the strata plan had been submitted to the local Shire but was yet to be approved. The vendor expressed their intention to transfer the land to the various proprietors as soon as the documents were available to do so. The strata plan search provided shows that the strata plan was approved by the Town Planning board prior to 20 September 1985. However the plan was not registered until after 20 September 1985. The transfer of land document was signed and dated by the vendor after 20 September 1985.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 109-5.

Reasons for decision: Summary: The general rules for the acquisition of CGT assets are contained in section 109-5 of the Income Tax Assessment Act 1997 (ITAA 1997). The table in subsection 109-5(2) of the ITAA 1997 specifically states that where an entity disposes of a CGT asset to you, you acquire it when the disposal contract is entered into or, if none, when the entity stops being the asset's owner. In this case, there was no contract prepared or signed in relation to the deceased's purchase of the commercial property. The acquisition date will therefore be the date that the vendor ceased to be the owner of the property. You have provided correspondence between the vendor and the deceased which evidence the intent of the vendor in relation to the change of ownership. However, these documents are not binding; they are merely an indication of the vendor's intent. The correspondence also refers to various events that are required to take place prior to the transfer or ownership being possible, including the approval and registration of the strata plan. The strata plan was not registered until after 20 September 1985. Although it is clear that there was an intention to transfer the land to the deceased prior to 20 September 1985, there was no contract for the sale of the land and there is no evidence to show that the change of ownership occurred prior to 20 September 1985. The transfer of land document was signed and dated after 20 September 1985. This is the date that the vendor ceased to be the owner of the property. Accordingly, the deceased is taken to have acquired the property on the date of transfer, being after 20 September 1985.

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