Private ruling: Capital gains tax - marriage breakdown and disposal of investment properties
Published: April 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1:  | A1:  | Q2:  | A2: 

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You and your former spouse jointly acquired two investment properties after 20 September 1985, property A and property B. You and your former spouse have now separated. You and your former spouse applied to the Federal Magistrates Court of Australia (the court) for a property settlement. The court issued consent orders dated late 2011. Under the consent order you and your former spouse were required to immediately list property A and property B for sale forthwith as per the conditions of the consent orders. Your former spouse purchased property A and property B at auction. You have provided a copy of the following documentation to support your application and these documents are to be read with and forms part of your application for the purpose of this ruling: Federal Magistrates Court of Australia - Family Law Act 1975 - Consent Orders dated late 2011 Contract for sale of land - property A, and Contract for sale of land - property B.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 108-7 | Income Tax Assessment Act 1997 Section 116-20 | Income Tax Assessment Act 1997 Section 115-5 | Income Tax Assessment Act 1997 Section 115-10 | Income Tax Assessment Act 1997 Section 115-15 | Income Tax Assessment Act 1997 Section 115-20

Reasons for decision: Summary: The most common capital gains tax (CGT) event, CGT event A1, occurs when you dispose of a CGT asset, the time of the event is when you enter into the contract for the disposal or if there is no contract - when the change of ownership occurs. CGT event A1 occurred when you disposed of your 50% interest in property A and property B. Individuals who hold a CGT asset as joint tenants are treated as if they each own a separate CGT asset comprising an equal interest in the asset. As a result of a marriage breakdown and the conditions under the consent orders dated late 2011 you and your former spouse had to dispose of property A and property B. The above properties were disposed of by auction. Your former spouse acquired your interests in the above properties at auction early 2012. You make a capital gain if the capital proceeds from the disposal of the asset are more than the asset's cost base. You make a capital loss if the capital proceeds are less than the asset's reduced cost base. The capital proceeds from a CGT event is the total money you received or are entitled to receive in respect of the event happening. In your case, you are taken to have acquired 50% of the proceeds upon the disposal of property A and property B. | Detailed Reasoning - Cost base: The cost base of a CGT asset is made up on five elements: · money or property given for the asset · incidental costs of acquiring the CGT asset or that relation to the CGT event · costs of owning the asset · capital costs to increase or preserve the value of your asset or to install or move it, and · capital costs of preserving or defending your ownership of or rights to your asset. You can use the discount method to calculate your capital gain as you meet all the relevant criteria. The individual discount percentage is 50%. For more information on the cost base and how to calculate your capital gain or capital please see the enclosed booklet which has been taken from the Guide to capital gains tax 2010-11 (NAT 4151-6.2010).

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Subject: Capital gains tax - marriage breakdown and disposal of investment properties: Question 1: Did you make a capital gain or capital loss on the disposal of your interest in property A? | Question 2: Did you make a capital gain or capital loss on the disposal of your interest in property B?