Private ruling: capital gains tax
Published: January 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: For capital gains tax purposes, will the first element of the cost base for the property be the deceased's cost base on the day they died? | A1: Yes.

Relevant facts and circumstances: You and your late spouse (the deceased) committed to purchase a property. The deceased passed away in the 2011-12 financial year. Settlement of the property occurred after the deceased passed away. The title to the property was registered in the estate of the deceased. You were the sole beneficiary of the estate. You paid the expenses of the property. The property was never used as your main residence. The property was available for the rent, but was never tenanted. The property passed to you as a beneficiary of the estate and you sold it in the 2012-13 financial year.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 128-15(4)

Reasons for decision: Summary: If you acquire a dwelling the deceased had owned, there are special rules for calculating your cost base. These rules apply in calculating any capital gain or capital loss when a CGT event happens to the dwelling. The first element of the cost base or reduced cost base of a dwelling, its acquisition cost, is its market value at the date of death if: § the dwelling was acquired by the deceased before 20 September 1985, § the dwelling passes to you after 20 August 1996 (but not as a joint tenant) and it was the main residence of the deceased immediately before their death and was not being used to produce income at that date, or § the dwelling passes to you as the trustee of a Special Disability Trust. In any other case, the acquisition cost is the deceased's cost base or reduced cost base on the day they died. If you are a beneficiary, the cost base or reduced cost base also includes amounts that the trustee of the deceased's estate would have been able to include in the cost base or reduced cost base. In this case, you inherited a property from your late spouse's estate. This property was purchased after 20 September 1985 and was not used as a main residence. Therefore, the cost base of the property for capital gains tax purposes is the deceased's cost base on the day they died.