Private ruling: CGT - cost base
Published: June 2012
Ruling period: Year ended 30 June 2011
Date scheme commenced: 01 July 2010

Ruling: Q1: Does the settlement amount, paid by you to the liquidator, form part of the cost base for the properties? | A1: Yes.

Relevant facts and circumstances: You were involved in a divorce settlement in relation to properties by way of family law and the family trust settlement. You were a beneficiary to the trust. The company trustee of the trust went into liquidation. The liquidator obtained an order from the Family Court setting aside the transfers of the properties to you. The liquidator listed a caveat on the properties. Consent orders were made between you, the liquidator and others who have an interest in the properties. The consent orders provided that a payment made by you to the liquidator would allow you to obtain clear title to the properties. Upon payment of the money to the liquidator you became the sole and beneficial owner of the properties.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 110-25 and | Income Tax Assessment Act 1997 subsection 110-25(6).

Reasons for decision: Summary: Note that all subsequent legislative references are to the Income Tax Assessment Act 1997 unless otherwise stated. The cost base of an asset consists of five elements and generally includes the cost of the asset when a taxpayer bought it as well as the costs associated with acquiring, holding and disposing of the asset (section 110-25). The fifth element of the cost base includes the capital expenditure that you incur to establish, preserve or defend your title to the asset or a right over the asset (subsection 110-25(6)). In your case it is accepted that the settlement payment was incurred to defend your title to the properties. Accordingly this payment will form part of the fifth element of the cost base in respect of the properties.

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