Private ruling: Capital Gains Tax
Date of advice: 19 January 2018
Published: May 2018
Ruling period: Year ending 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Can you include the council rates associated with the vacant block of land as part of the cost base? | A1: Yes

Relevant facts and circumstances: You are the executor (legal personal representative) of the estate of the deceased who passed away in June 20XX. The deceased owned a vacant block of land at the time of their death. A title search of the land showed the deceased became the register owner of the property in late 19XX. The property was purchased for $xx and you recently sold it for $xx. You have incurred council rates in relation to the deceased property.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 128-15(3) | Income Tax Assessment Act 1997 section 128-25(3)

Reasons for decision: Summary: The Income Tax Assessment Act 1997 section 128-15 sets out the modifications to the cost base and reduced cost base of a CGT asset owned by a deceased at death in the hands of the deceased's legal personal representative or a beneficiary. In short, the first element of your cost base is the cost base of the land on the date of the deceased death. Section 128-25(3) advises that a beneficiary can include in the cost base or reduced cost base of the asset any expenditure that the legal personal representative would have been able to include at the time the asset passes to the beneficiary. The beneficiary can include the expenditure on the day the representative incurred it. In your case you have incurred council rates on the vacant block of land. These costs are considered costs of owning the asset and are included in the third element of the cost base.