Private ruling: Capital gains tax
Published: December 2014
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to apply the capital gains tax (CGT) discount to the sale of your property? | A1: 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. You purchased a block of land with a house on it during the relevant financial year. You demolished the house and built a duplex. Your intention was to live in one unit and sell the other. The construction of the duplex was completed in the subsequent year. Midway through the subsequent year, the property was subdivided between your principal place of residence and the other unit.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 112-25. | Income Tax Assessment Act 1997 Section 115-25.

Reasons for decision: Summary: Section 112-25 of the Income Tax Assessment Act 1997 (ITAA 1997) states that the subdivision of land into a number of lots is not a capital gains tax (CGT) event provided you are the beneficial owner of the original asset and each new asset. When the split of the original asset occurs, each element of the cost base or reduced cost base is apportioned in a reasonable way to each new asset. Although separate new titles may be registered under the subdivision to divide part of your original property into subdivided blocks, the blocks are taken to be acquired by you when the original property was acquired. A 50% discount may be applied to a discount capital gain realised by an individual. In order to be considered a discount capital gain, the asset that gave rise to the capital gain must have been owned for a period of at least 12 months prior to the CGT event (section 115-25 of the ITAA 1997). In this case, you acquired the land with a house on it during the relevant financial year. Therefore, although you divided the original block into two titles, the acquisition date of both blocks is the date that you initially purchased the original block. As you have held the block for more than 12 months, you are entitled to apply the CGT discount.