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

Ruling: Question and answer | Does the Commissioner have any discretion to exempt you from capital gains tax? | No.

Relevant facts and circumstances: You purchased a house with your relatives. Your name was on the title deed with your relatives. You contributed financially to renovations carried out on the property. You lived in the property as your main residence with your relative for a number of years. You then left the property and purchased a family home with your spouse. You were required to get a more substantial loan to purchase the family home with your spouse as your relatives did not have the finances to buy your share of the property. Your relatives have sold the property and are giving you money which represents the principal and calculated interest. Your relatives are treating your contribution to the purchase of the property as a loan. There is no agreement to evidence such a loan. You have declared a capital gain realised from the sale of the property in your tax return and have reduced this amount by applying the partial main residence exemption for the period it was your main residence and the 50% discount.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20

Reasons for decision: Summary: Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a taxpayer makes a capital gain or loss as a result of a capital gains tax (CGT) event happening to a CGT asset. CGT assets include real estate acquired on or after 20 September 1985. A taxpayer makes a capital gain if their capital proceeds from the sale of a CGT asset are greater than the cost base for the purchase of that asset, for example, if a taxpayer received more for an asset than they paid for it. A taxpayer makes a capital loss if their reduced cost base for the purchase of that asset is greater than the capital proceeds resulting from the sale of that asset. Capital gains tax is not a separate tax, it forms part of a taxpayer's assessable income and is taxed at each taxpayer's marginal tax rate. The sale of a property results in a CGT event occurring. This is CGT event A1. You purchased a property with your relatives and lived in it for a period of time as your main residence before you subsequently purchased a family home with your spouse. The property has been sold and a capital gain was realised on the sale of the property. The Commissioner has no discretion to exempt you from paying capital gains on the sale of the property. The legislation does not make provisions for an exemption in your circumstances. The capital gain you made on the sale of the property is assessable and is required to be declared in your tax return.