Private ruling: CGT - first element - market substitution rule
Date of advice: 11 October 2021
Published: December 2021
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the first element of cost base of the property be market value at the time of acquisition in accordance with paragraph 112-20(1)(c) of the Income Tax Assessment Act 1997? | A1: Yes. Having considered your circumstances and the relevant factors, it is accepted that you did not deal at arm's length with the other entity in connection with the acquisition of the property. As a result, the market value substitution rule will apply to change the first element of your cost base or reduced cost base of the property to the market value at the time the asset was acquired. Further information on capital proceeds can be found by searching QC 64895 on ato.gov.au.

Relevant facts and circumstances: Your parents owned a property (the property). You purchased the property from your parents for substantially less than market value. A report was conducted to identify the market value of the property (at the time of acquisition).

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 100-25 | Income Tax Assessment Act 1997 Section 102-20 | Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 108-5 | Income Tax Assessment Act 1997 Section 110-55 | Income Tax Assessment Act 1997 Division 112 | Income Tax Assessment Act 1997 Paragraph 112-20(1)(c) | Income Tax Assessment Act 1997 Subsection 995-1(1)