Private ruling: Capital gains tax: CGT event: deceased estate
Date of advice: 16 April 2019
Published: June 2019
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2017

Ruling: Q1: Did a capital gains tax event arise in the year ending 30 June 20XX? | A1: Yes | Q2: Did a capital gains tax event arise in the year ending 30 June 20XX? | A2: Yes

Relevant facts and circumstances: You purchased the property. The property was purchased as joint tenants with Person B. The property was a farming property. You signed a Contract of Sale for the sale of the property in the year ended 30 June 20XX. Person B passed away in the year ending 30 June 20XX. The sale of the property was settled in the year ending 30 June 20XX.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 108-7 | Income Tax Assessment Act 1997 subsection 128-50(2)

Reasons for decision: Summary: A capital gains tax (CGT) event arises in the year ending 30 June 20XX. | Detailed Reasoning - Detailed reasoning: Section 108-7 of the Income Tax Assessment Act 1997 (ITAA 997) provides that where individuals own CGT assets as joint tenants, they are treated as if they hold the CGT asset as tenants-in-common in equal shares. Subsection 104-10(1) of the ITAA 1997 provides that CGT event A1 happens if you dispose of a CGT asset. Subsection 104-10(2) of the ITAA 1997 provides that you dispose of a CGT asset if a change of ownership occurs from you to another entity. Paragraph 104-10(3)(a) of the ITAA 1997 provides that you dispose of the property when you either enter into the contract for its disposal. | Detailed Reasoning - In your circumstances: As the property was owned as joint tenants, you are treated as if half the property was owned by you individually. Therefore, you entered into a Contract of Sale to sell your half of the property to the vendor in the year ended 30 June 20XX. A change in the ownership of the property, and hence a disposal, occurs at the time of the completion of the Contract of Sale. This occurred in the year ending 30 June 20XX and it was at this time that a CGT event arose. However, paragraph 104-10(3)(a) deems the disposal of the property to have occurred when you entered into the Contract of Sale for its disposal. Therefore, a CGT event occurred for your share of the property in the year ended 30 June 20XX. Any capital gain or capital loss for your share of the property will need to be calculated and included in your individual tax return for the year ending 30 June 20XX. | Summary: A CGT event arises in the year ending 30 June 20XX. | Detailed Reasoning - Detailed reasoning: Section 108-7 of the ITAA 1997 provides that where individuals own CGT assets as joint tenants, they are treated as if they hold the CGT asset as tenants-in-common in equal shares. Subsection 128-50(2) of the ITAA 1997 provides that where a joint tenant dies, the remaining joint tenant is taken to have acquired the deceased individual’s interest on the day they died. Subsection 104-10(1) of the ITAA 1997 provides that CGT event A1 happens if you dispose of a CGT asset. Subsection 104-10(2) of the ITAA 1997 provides that you dispose of a CGT asset if a change of ownership occurs from you to another entity. Subsection 104-10(3) of the ITAA 1997 provides that you dispose of the property when you either enter into the contract for its disposal, or where no contract exists, when the change of ownership occurs. | Detailed Reasoning - In your circumstances: As the property was owned as joint tenants, you are treated as if half the property was owned by you individually. When Person B passed away, you were taken to have acquired their half interest (Person B’s interest) in the property. This occurred in the year ending 30 June 20XX. A change in the ownership of the property, and hence a disposal, occurs at the time you disposed of Person B’s interest. Although Person B had entered into a Contract of Sale to dispose of their interest, that interest passed to you prior to completion of that Contract of Sale. As you had not entered into a Contract of Sale to dispose of Person B’s interest, the disposal occurred when there was a change of ownership of Person B’s interest. This occurred in the year ending 30 June 2019 and it was at this time that a CGT event arose. Therefore, a CGT event occurred for Person B’s interest in the property in the year ending 30 June 20XX. Any capital gain or capital loss for interest you acquired from Person B will need to be calculated and included in your individual tax return for the year ending 30 June 20XX.