Private ruling: Capital gains tax
Published: March 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Questions and answers | 1. Are you liable for Capital gains tax on your share of the sale of the property? | Yes. | 2. Is the first element of the cost base the market value of the property on the day your share was transferred to you? | 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. Your parents transferred a share of their main residence into your name a number of years ago. You did not live in the property at any stage. The property was sold in a particular year financial year.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20. | Income Tax Assessment Act 1997 section 112-20.

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. Your parents transferred a share of their property into your name. You never lived in the property. The property was sold in a particular income year. There are no exemptions in the tax law which provides an exemption from CGT for you in this case. Any capital gain that was made on the sale of the property is assessable and must be included in your 2014 tax return. Section 112-20(1) states that the first element of your cost base and reduced cost base of a CGT asset you acquire from another person is its market value (at the time of acquisition), where you did not incurred expenditure to acquire it. In your case when calculating the cost base the first element will be the market value of the property on the day it was transferred to you.