Private ruling: Capital gains tax
Published: September 2013
Ruling period: Year ending 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Question and answer: | Are you entitled to disregard the capital gain you made on the disposal of the property? | No.

Relevant facts and circumstances: You purchased a property after 20 September 1985. The house you live in is situated on the property. A government department (the government) identified a portion of your property for acquisition. The government offered to purchase the portion of land by negotiation; however, if agreement was not reached, the land would be acquired by compulsory acquisition. The new boundary line proposed by the government was unsatisfactory from your point of view. You objected against the decision to acquire your land however, you were unsuccessful. You negotiated the relocation of the new boundary line and the purchase price with the government. The only way you could negotiate the relocation of the boundary was to negotiate the sale as well. You eventually sold a portion of vacant land to the government. You did not wish to sell the land and you consider that you sold it as a last resort as you were left without further options. You made a capital gain on the sale of the land. You did not purchase another property after you sold the land.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20 | Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 115-25 | Income Tax Assessment Act 1997 Section 115-100 | Income Tax Assessment Act 1997 Section 124-70

Reasons for decision: Summary: Your assessable income for income tax purposes includes the amount of any net capital gain you make in an income year. You make a capital gain or loss only if a capital gains tax (CGT) event happens. The most common CGT event happens if you dispose of an asset to someone else, for example, if you dispose of a property. The time of the event is when you enter into the contract for the disposal, or if there is no contract, when the change of ownership occurs. The disposal of your interest in the property constitutes CGT event A1. Generally, a capital gain or capital loss you make is disregarded if you originally acquired the property before 20 September 1985 or if the property was your main residence. You may be eligible for CGT roll-over relief if: · an asset owned by you is compulsorily acquired by an Australian government agency, or · you dispose of an asset as a result of representations made to you by an entity in relation to the acquisition of the asset by negotiated sale, or failing that, compulsory acquisition. To be eligible for roll-over relief, you must receive money or another CGT asset or both for the compulsory acquisition or disposal, and you must incur expenditure in acquiring another CGT asset; that is, a replacement asset. In your situation, you: · originally acquired a property after 20 September 1985; · subsequently sold a portion of vacant land to the government; · sold the land unwillingly as you felt you had no choice; · believe that the sale of your land should be exempt from any capital gains tax liability due to the nature of the sale process to the government and the land's conservation status; and · did not purchase another property after you sold the land. CGT event A1 happened when you disposed of the property. You made a capital gain as a result of this event. There are no provisions in the income tax legislation that allow you to disregard the capital gain. Further, you are not eligible for CGT roll-over relief as you did not incur expenditure in acquiring another CGT asset. Therefore, the capital gain you made on the sale of your land is included in your assessable (taxable) income. Although we acknowledge the circumstances surrounding the sale of the land, the Commissioner has no powers of discretion under the law to grant an exemption from taxation to individual taxpayers where the law states that tax applies. You are entitled to a 50% discount on the amount of the capital gain you made as you owned the land for at least 12 months before you disposed of it.