Private ruling: Capital gains tax – pre CGT
Date of advice: 5 February 2018
Published: June 2018
Ruling period: Year ended 30 June 2018.
Date scheme commenced: 1 July 2017.

Ruling: Q1: Are you entitled to disregard the capital gain or capital loss on the sale of your pre-CGT property after receiving the payment by instalments over an extended period of time? | A1: Yes.

Relevant facts and circumstances: You purchased the property prior to 20 September 1985 (the Property). Sometime later you moved away from the Property and it has remained vacant since this time. You have a terminal illness. You want to leave the property solely to Child A in your Will to secure their financial future. Your other children and their extended family have indicated that they will challenge the Will if the Property is left solely to Child A. You have decided to sell the Property to your Child A rather than leave it to them in your Will so as to avoid a challenge to your Will, and to protect Child A from other family members trying to inherit the Property. Child A will purchase the property from you. The title of the Property will be transferred to Child A. Child A will pay for the Property by instalments over an extended period after the Property has been transferred to them.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 108-5 | Income Tax Assessment Act 1997 Section 109-5

Reasons for decision: Summary: All assets you’ve acquired since capital gains tax (CGT) started on 20 September 1985 are subject to CGT unless specifically excluded. A CGT asset that you acquired prior to 20 September 1985 is exempt from CGT. In your case, you acquired the Property a number of years before 20 September 1985. Your property is a CGT asset, however as it was acquired before 20 September 1985 any disposal will be exempt from CGT. You will transfer the title of the Property to Child A, who will then pay you for the Property in instalments. This will not affect the Pre-CGT status of the property, and you may disregard a capital gain or a capital loss made on the disposal of the Property.