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

Ruling: Q1: Are you entitled to disregard the capital gain or capital loss on the sale of your pre-CGT asset? | A1: Yes

Relevant facts and circumstances: You acquired an asset prior to 20 September 1985. Additions were made to the asset prior to 20 September 1985. No further additions were made to the asset post 20 September 1985. The asset was used to produce assessable income.

Relevant legislative provisions: Income Tax Assessment Act 1997 - Section 108-5. | Income Tax Assessment Act 1997 - Subsection 104-10(4). | Income Tax Assessment Act 1997 - Paragraph 104-10(5)(a).

Reasons for decision: Summary: Section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) states that a capital gains tax (CGT) event A1 happens if a taxpayer disposes of a CGT asset. Section 108-5 of the ITAA 1997 provides that a CGT asset is any kind of property, or a legal or equitable right that is not property. A capital gain or a capital loss may arise if a CGT event happens to a CGT asset. The asset held is a CGT asset. The sale of the asset will give rise to CGT event A1 and any realised gain on the transaction will be a capital gain under subsection 104-10(4) of the ITAA 1997. Subparagraph 104-10(5)(a)(i) of the ITAA 1997 provides that a capital gain or capital loss from the CGT event A1 is disregarded if the asset was acquired before 20 September 1985. In your case you acquired the asset prior to 20 September 1985 and there were no improvements made to the asset post 20 September 1985. Therefore, you can disregard any capital gain made from the disposal of the pre-CGT asset.