Private ruling: Capital gains tax – rights - surrender
Date of advice: 18 September 2018
Published: October 2018
Ruling period: 30 June 2018.
Date scheme commenced: 1 July 2013.

Ruling: Q1: Is any capital gain or loss you make due to surrendering the rights granted to you under the Deed of Licence disregarded? | A1: Yes. Your capital gains tax (CGT) asset was the rights that were granted to you under the Deed of Licence. CGT event C2 happened when you surrendered your rights. The rights granted to you under the Deed were an ownership interest in the dwelling located on the Property because they provided you with the right to occupy the dwelling. Your ownership period commenced when you entered into the Deed and ended when you surrendered your rights under it. Any capital gain or loss you make from the surrender of the rights granted to you under the Deed is disregarded because: ● you are an individual; ● the rights granted to you under the Deed provided you with an ownership interest in the dwelling on the Property for CGT main residence purposes; ● the dwelling on the Property was your main residence throughout your ownership period of the rights granted to you under the Deed; ● you did not acquire these rights as beneficiary of the estate of a deceased person; ● CGT event C2 occurred when you surrendered your rights, which is eligible for the CGT main residence exemption: and ● the Property is less than two hectares in size.

Relevant facts and circumstances: Your relative, Person A, entered into a contract to purchase the Property after 20 September 1985. During the following month, a Deed was signed by you and Person A from which the following information has been sourced: ● Person A had entered into a contract to purchase the Property; ● you were entitled to occupy the Property in accordance with the terms of the Deed from a date shortly after the Deed was entered into; ● Person A granted you a right to enter and use the Property from a specified date in conjunction with the right of Person A to use the Property; ● you paid Person A a specified amount; and ● in the event that Person A sold the Property, you would be paid a specified percentage of the gross sale price received from the sale of the Property. After a short period, settlement on the purchase of the Property occurred and you moved into the Property. The Property was listed for sale a number of years later and a contract for the sale of the Property was entered into, with you moving out of the Property shortly after the sale contract was entered into. Settlement on the sale of the Property occurred after a number of months. You received the specified percentage of the gross sale price received from the sale of the Property in accordance with the Deed.

Relevant legislative provisions: Income Tax Assessment Act 1997 Part 3-1 | Income Tax Assessment Act 1997 Part 3-3