Private ruling: Capital gains tax - Real property
Published: February 2012
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Did you acquire the inherited interest in the property at the market value of that interest on the death of your parent? | A1: Yes. | Q2: Can you use the discount method to calculate any capital gain tax that you may be liable for? | A2: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 102-20(1) | Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Paragraph 108-5(1)(a). | Income Tax Assessment Act 1997 Division 115 | Income Tax Assessment Act 1997 Paragraph 128-15(4)

Reasons for decision: Summary: You make a capital gain or capital loss if a capital gains tax (CGT) event happens (subsection 102-20(1) of the Income Tax Assessment Act 1997 ( ITAA 1997) to a CGT asset. Section 104-10 of the ITAA 1997 specifies that a CGT event A1 happens if you dispose of an ownership interest in a CGT asset. The property owned by you, is a CGT asset (paragraph 108-5(1)(a) (ITAA 1997). The sale of the property will be a disposal which will give rise to CGT event A1 (section 104-10 of the ITAA 1997). If the capital proceeds from the sale of the property are greater than the cost base of the property, you will make a capital gain. If the reduced cost base of the property is greater than the proceeds from the sale, you will make a capital loss. As you inherited the interest of your parent, who was a foreign resident, the market value of the interest at the date of death is used to determine the first element of the cost base. | Detailed Reasoning - Discount method: Under Division 115 of the ITAA 1997, you can use the discount method to calculate your capital gain if: § you are an individual, a trust or a complying superannuation entity § a CGT event happens to an asset you own § the CGT event happened after 11.45am (by legal time in the ACT) on 21 September 1999 § you acquired the asset at least 12 months before the CGT event and § you did not choose to use the indexation method. You are an individual, a CGT event has occurred to your property after the required period, you acquired the land at least 12 months before the property was disposed, and if you do not choose the indexation method, you will satisfy all of the above conditions to use this method. The discount method allows you to discount your capital gain. The discount percentage, which is the percentage by which you reduce your capital gain, is currently 50% for individuals.

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. | The property was originally purchased prior to 20 September 1985 with your parent, owning a interest in the property and you and your spouse each owning a interest as tenants in common. | Your parent was a foreign resident of Australia | You, your spouse and parent borrowed an amount to purchase the property | Your late parent passed away after 20 September 1985 and you and your spouse inherited their share of the property. | The change in the interest of the property was registered after 20 September 1985 | You disposed the property and have made a capital gain. | You have provided a document: which forms part of, and should be read in conjunction with, this private ruling.