Private ruling: Capital Gains Tax - deceased estate - cost base of interests in vacant land
Published: July 2013

Ruling: A2: This ruling applies for the following period Year ended 30 June 2012 The scheme commences on 1 July 2011

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. After 20 September 1985, you and your spouse jointly acquired a vacant block of land (the land) with the intention of constructing your home. You and your spouse commenced obtaining plans and permits to construct a dwelling. Your spouse became seriously ill so the plans and permits were put on hold. Upon the death of your spouse, your spouse's interest in the land was transferred into your name. Early last year you gifted the land to your child.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 108-7 | Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 128-15 | Income Tax Assessment Act 1997 Section 128-50

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. The most common capital gains tax (CGT) event is CGT event A1, which occurs when you dispose of a CGT asset. The time of the event is when you enter into the contract for its disposal, or if there is no contract, when the change of ownership occurs. CGT event A1 occurred when you gifted the land to your child. | Detailed Reasoning - Deceased estate: If you acquire an asset owned by a deceased person as a beneficiary you are taken to have acquired the asset on the day the person died. If the deceased acquired the asset after 20 September 1985, you are taken to have acquired the asset for the deceased's cost base or reduced cost base on the day the person died. | Detailed Reasoning - Joint tenants: Special rules apply for joint tenants. Generally, for assets owned as joint tenants they are each deemed to own a separate asset, being equal shares in the jointly owned asset. If joint tenants own a CGT asset and one of them passes away, the interest of the deceased joint tenant in the asset is deemed to be acquired by the surviving joint tenant. The date of the deemed acquisition of the interest is the date the deceased joint tenant passes away. Therefore, you are taken to have acquired your spouse's interest in the land on their date of death. As such, you had two separate interests in the land, acquired at different times. Your original 50% interest in the land was acquired at the time of purchase. The remaining 50% interest was acquired on the death of your spouse, as a surviving joint tenant. Each of these interests are considered to be a separate CGT asset and must be dealt with separately. The intention to construct or occupy a dwelling as a sole or principal residence, but without actually doing so, means that the legislation that applies to a main residence is not applicable in your situation. Therefore, the cost base of the interest you acquired at the time of purchase will be 50% of the purchase price. The interest you acquired from your spouse's estate will be their cost base which is 50% of the purchase price.

Subject: Capital Gains Tax - deceased estate - cost base of interests in vacant land: Question 1: Is the cost base of the 50% interest you acquired in the vacant land in 1987 50% of the purchase price? | Question 2: Is the cost base of the 50% interest you acquired from a deceased estate the deceased's cost base?