Private ruling: Capital gains tax
Date of advice: 5 November 2025
Published: 22 December 2025
Ruling period: Year ending 30 June 20YY
Date scheme commenced: DD MM YY

Ruling: Q1: Can you disregard any capital gain or loss you make on disposal of the propertylocated at XXXX that you intend to gift to Person A? | A1: No.

Relevant facts and circumstances: On DD MM YY, you purchased the property at XXXX as joint tenants. The purchase price was $XXXX. You moved into the property immediately after the property settlement, and you have continued to live there as your main residence. The property was never used to produce income. The property contains a dwelling and is XX m² in size. On DD MM YY, you started a subdivision process. You have subsequently obtained a Plan of Proposed Subdivision. You intend to subdivide the property into two lots: • Lot A containing the existing dwelling will be about XX m². Estimated market value is between $XX and $XX. • Lot B containing vacant land will be about XX m². Estimated market value is between $XX and $XX. You intend to gift Lot B to Person A, without receiving any monetary consideration. You never intended to sell the property and it was always your intention to give it to your children. The subdivision is expected to be completed by DD MM YY. The transfer of Lot B to Person A is expected to be completed by DD MM YY.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 116-30 | Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 section 118-120 | Income Tax Assessment Act 1997 section 118-135

Reasons for decision: Summary: Your net capital gain is included in your assessable income by section 102-5 of the Income Tax Assessment Act 1997 (ITAA 1997). Your net capital gain is calculated by subtracting any capital losses that you may have accrued from your capital gains made in that income year. Section 102-20 of the ITAA 1997 provides that a capital gain or capital loss results from a capital gains tax (CGT) event occurring. Subsection 104-10(1) of the ITAA 1997 provides that CGT event A1 happens if an entity disposes of a CGT asset. A 'disposal', as defined in subsection 104-10(2) of the ITAA 1997, occurs when there is a change of ownership from one entity to another. A 'CGT asset', as provided in section 108-5 of the ITAA 1997, is: • any kind of property, or • a legal or equitable right that is not property. Under subsection 116-20(1) of the ITAA 1997, your capital proceeds from a CGT event include the total of the money you have received, or are entitled to receive, in respect of a CGT event happening. Where on the disposal of an asset no money or property is received, the market value substitution rule contained in section 116-30 of the ITAA 1997 generally applies, such that you are taken to have received the market value of your ownership interest in the property at the time the CGT event occurs. If you sell, transfer or gift property to family or friends for less than it is worth, you'll be treated as if you received the market value of the property for CGT purposes. You use the market value of a property to calculate your CGT if both of the following are true: • what you received was more or less than the market value of the property • you and the new owner were not dealing with each other at arm's length. This is called the 'market value substitution' rule. | Detailed Reasoning - Application to your situation: In your case, you've maintained an ownership interest in the property at XXXX that was purchased on DD MM YY. On DD MM YY, you started a subdivision process. You intend to subdivide the property into two lots, and you intend to gift Lot B to Person A. The subdivision is expected to be completed by DD MM YY. The transfer of Lot B to Person A is expected to be completed by DD MM YY. Person A will not pay any money on the transfer of the title from you. As Person A will acquire the property from you for no consideration, the market value substitution rule will apply to modify the first element of the cost base of the property. When calculating the capital gain or loss associated with the disposal of the property the capital proceeds will be the market value of that property on the day the CGT event occurs (the transfer date). | Detailed Reasoning - Claiming the CGT 50% discount: As you owned the land as joint tenants, any net capital gain or loss resulting from its disposal will be shared based on your respective ownership interests. When you sell or otherwise dispose of an asset, you can reduce your capital gain by 50%, if both of the following apply: • you owned the asset for at least 12 months • you are an Australian resident for tax purposes. This is called the capital gains tax (CGT) discount.