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

Ruling: Q1: Is your share of a rental property transferred to you from your parents after 20 September 1985 a pre-CGT asset? | A1: No. | Q2: Are you able to disregard your share of the capital gain made on the disposal of the rental property? | A2: No.

Relevant facts and circumstances: Sometime in early 198X a related party decided to transfer an ownership share in a rental property to you. Prior to 20 September 1985 the title to the property was provided to a solicitor and a valuation fee was paid. You started to receive a share of the rent derived from the property prior to 20 September 1985. The transfer of the title to the property was finalised after 20 September 1985. You made a capital gain when you disposed of your share in the property.

Relevant legislative provisions: Income Tax Assessment Act 1997 paragraph 104-10(5)(a) | Income Tax Assessment Act 1997 section 109-5 | Income Tax Assessment Act 1997 subsection 109-5(2)

Reasons for decision: Summary: A capital gain or loss you make is disregarded if you acquired the asset before 20 September 1985 (paragraph 104-10(5)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)). In general, you acquire a capital gains tax (CGT) asset when you become its owner (section 109-5 of the ITAA 1997). CGT event A1 happens when an entity disposes of a CGT asset to you (subsection 109-5(2) of the ITAA 1997). You acquire the CGT asset when the disposal contract is entered into, or if none, when the entity disposing of the asset stops being the asset's owner (subsection 109-5(2) of the ITAA 1997). A contract is a legally binding agreement between two parties. An expression of an intention to gift or donate property to another party does not give rise to a contract between the donor and the intended recipients. In your case you did not acquire your share of the rental property under a contract; rather, it was gifted to you. Therefore, you acquired your share of the rental property when the donor stopped being the asset's owner. That is, when the title to the property was transferred to you after 20 September 1985. As you acquired your share of the property after 20 September 1985 it is a post-CGT asset and the exception in paragraph 104-10(5)(a) of the ITAA 1997 will not apply to disregard any capital gain or loss you made on the disposal of your share of the property.