Private ruling: CGT - barter consideration
Published: May 2013
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Does the sale of barter assets give rise to CGT Event A1? | A1: Yes | Q2: Is a loss on the sale of barter assets a capital loss? | A2: Yes

Relevant facts and circumstances: You own real property which is rented whilst being actively marketed for sale. Occasionally the properties are sold and some of the consideration is received as a barter. It is not always possible to use the barter for expenses. When you have excess barter, they are sold to third parties. The price you obtain for this sale is generally less than the value able to be achieved by bartering.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 108-5 | Income Tax Assessment Act 1997 section 104-10

Reasons for decision: Detailed Reasoning - Detailed reasoning: The barter is a capital gains tax (CGT) asset because it is property under section 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997). The barter is property because it can be assigned, transmitted or turned to account with a third party (paragraph 43 of Taxation Ruling TR 95/35). In accordance with section 104-10 of the ITAA 1997, when you sell the barter, CGT event A1: Disposal of an asset occurs. Capital Loss Section 100-35 of the ITAA 1997 provides that you make a capital loss upon a CGT event happening where the cost base of the relevant CGT asset exceeds the proceeds you receive in respect of that event. As the barter is a CGT asset, the sale of this asset may result in a capital gain or a capital loss. The capital gain or capital loss is calculated by deducting the cost base from the capital proceeds. In your case, the cost base is the amount that you paid to acquire the barter, or the AUD value of the amount of the barter received as payment on sale of the property. The capital proceeds are the amount that you received upon the sale of your barter. A capital loss can be carried forward indefinitely until all of the capital loss is offset against any capital gains. A capital loss can only be offset against a capital gain. You need to retain your records in regards to this loss for five years after applying all capital losses.