Private ruling: Capital gains tax
Date of advice: 17 October 2022
Published: 9 January 2023
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the profit on the sale of the property be assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?" | A1: No. Based on the information you have provided to the Commissioner, the proceeds from the sale of the property will not be assessable under section 6-5 of the ITAA 1997. Division 104 of the ITAA 1997 sets out the CGT events that can happen to a CGT asset and section 104-10 provides that CGT event A1 occurs on the disposal of an asset. As a consequence of CGT event A1, subsection 104-10(4) of the ITAA 1997 provides that you make a capital gain if the capital proceeds from the disposal are more than the assets cost base or conversely you make a capital loss if the capital proceeds are less than the assets reduced cost base. The disposal of the property is considered a mere realisation of a capital asset and subject to capital gains tax pursuant to subsection 104-10(4) of the ITAA 1997 and assessable as statutory income under section 102-5 of the ITAA 1997.

Relevant facts and circumstances: The land was purchased over a decade ago from your relative. The purchase was intended to provide your relative with financial assistance and retain the land within the family for sentimental reasons. The land was not intended to be bought and sold for profit. At the time of purchase a shed had already been built on the property which was built for private use. There were no amenities in the shed and the only improvement made to the property was the electricity recently being connected to the shed, which was intended to eventually be a temporary home for your child. You planned to build a home on the property at a later time in order for your child to live in it, however, they subsequently changed their mind and remained living in City Z. You make regular trips to see your child and are considering a permanent move to City Z. You do not currently own any other property. You previously owned a property you inherited along with a relative. This property was held for several years and recently disposed of and was not used to produced income. The inherited property was sold for less than the market value at the time of inheritance. You have a pending contract for the current land and shed. You expect to make a loss on the sale of the property.

Relevant legislative provisions: Income Tax assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 102-5 | Income Tax Assessment Act 1997 section 104-10