Private ruling: Whether a capital gain is to be disregarded
Date of advice: 25 November 2016
Published: April 2017
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Should the capital gain from the sale of pre-CGT assets in the 20XX-YY income year be disregarded under subsection 104-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes

Relevant facts and circumstances: An entity owned pre-CGT assets. During the 20XX-YY financial year the entity sold the pre-CGT assets.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 104-10(5)

Reasons for decision: Summary: A comprehensive capital gains tax (CGT) regime generally applies to CGT events that happen to CGT assets acquired by a taxpayer after 19 September 1985. Section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) discusses the disposal of a CGT asset under CGT event A1. CGT event A1 happens if you dispose of a CGT asset. You dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner. There is an exception however, under subsection 104-10(5) of the ITAA 1997 in that a capital gain or capital loss you make is disregarded if you acquired the asset before 20 September 1985. Most CGT events involve a CGT asset. An example of a CGT asset is land and a building. Section 102-23 of the ITAA 1997 in part states a CGT event still happens even if a capital gain or capital loss from the event is disregarded. In this case the entity purchased a number of assets before 20 September 1985. The entity sold the assets during the 20XX-YY financial year. CGT event A1 happened when the assets were sold. A capital gain was made on the sale; however it is to be disregarded as the entity acquired the assets before 20 September 1985.