Private ruling: Capital gains tax and the sale of property
Published: June 2012
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Is the gain made from the sale of the property a capital gain pursuant to the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. | Q2: Is the gain made from the sale of the property disregarded under subsection 104-10(5) of the ITAA 1997? | A2: Yes.

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. Some time prior to 20 September 1985, you acquired a property. The property comprises an area of over two hectares. There are a number of old style factory buildings situated on the land. You acquired the property as a commercial property for rental purposes. The property has been used to derive rental income at all times since you acquired it. Some time in the 2011 income year you disposed of the property to an associated entity. The property was disposed of for consideration of a certain amount. The sale consideration was paid in cash in full. Stamp duty has been paid on the purchase and the transfer has been registered. The sale price was equal to the market value of the property which had been determined by a registered valuer. You did not build any structure on the land during your period of ownership and any improvements and repairs made to the existing structures on the property prior to the date of sale do not exceed the capital improvements threshold. As the sale price exceeds the original cost of the property, a gain or profit has been made on the disposal. During the 2011 financial year, you have distributed part of the gain from the disposal of the property to various beneficiaries. All beneficiaries are presently entitled Australian resident individuals and are within the allowable class of beneficiaries under the trust deed. None of the beneficiaries are under a legal disability. None of the beneficiaries are acting in their capacity as a trustee of another trust estate.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10, | Income Tax Assessment Act 1997 Subsection 104-10(5), | Income Tax Assessment Act 1997 Section 108-5 and | Income Tax Assessment Act 1997 Section 115-215.

Reasons for decision: Summary: Section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that capital gains tax (CGT) event A1 happens where you dispose of a CGT asset. Pursuant to section 108-5 of the ITAA 1997, property is a CGT asset. Subsection 104-10(5) of the ITAA 1997 provides that any capital gain or capital loss that you make when you dispose of a CGT asset is disregarded if you acquired the asset before 20 September 1985. In your situation, you acquired the property prior to 20 September 1985 and therefore any capital gain or capital loss that you made when it was sold is disregarded. As any capital gain made from the sale will be disregarded, the beneficiaries of the trust are not required to include any amount of the capital gain in their assessable income.

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.