Private ruling: CGT - deductions and cost base applicable to a non-income producing property.
Date of advice: 20 March 2018
Published: June 2018
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 January 20XX

Ruling: Q1: If no rental income is generated is a property still subject to capital gain tax? | A1: Yes If you chose not to rent your investment property, CGT is applicable in the same way as a rental property. Division 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997) states that any kind of property is a CGT asset. | Q2: Are you able to claim income tax deductions for the costs of owning a property where there is no intention for it to become an income producing asset? | A2: No Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic in nature, or relate to the earning of exempt income. Accordingly, to be able to claim expenses that relate to the property you must have held the property for the purpose of gaining or producing assessable income, and those expenses must not be of a private or domestic nature. As you will not use your property for producing assessable income, you will not be able to claim deduction | Q3: Are you able to include the costs of ownership in the property’s cost base and what costs are eligible? | A3: Yes As you cannot claim deduction because you will not use your property to produce assessable income you can include the following in the cost base as per Section 110-25(4) of the ITAA 1997: ● Rates ● Insurance ● Land tax ● Maintenance costs ● Interest on money you borrowed to buy or improve the property


Relevant legislative provisions: Income Tax Assessment Act 1997 Division 108-5 | Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 110-25(4)


Relevant facts: The entity’s family member will retire at the end of the year and would like to live in the same town as the entity. | The entity wants to purchase a property for the family member to live in rent free and will apply for an investment loan.