Private ruling: Pre-CGT status of land
Published: July 2012
Ruling period: 1 July 2012 to 30 June 2013
Date scheme commenced: I July 2012

Ruling: Q1: Whether the majority underlying interest in the land (the land), held by those prior to 20 September 1995, is maintained on the date of this ruling, thereby maintaining the pre-CGT status of the land under section 149-10 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.

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. X Pty Ltd was incorporated in 1958. It was a fully owned subsidiary of Y Holdings, which later came to be known as Y PLC. X Pty Ltd bought the land in 1959. X Pty Ltd would like to subdivide and sell part of the land. X Pty Ltd has provided the financials which show that Y PLC maintained its 100% shareholding of X Pty Ltd from the date of its incorporation until the date the land is subdivided and sold.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 108-5(1) | Income Tax Assessment Act 1997 section 149-10 | Income Tax Assessment Act 1997 section 149-15 | Income Tax Assessment Act 1997 subsection 149-30(1)

Reasons for decision: Summary: A CGT asset is defined under subsection 108-5(1) of the ITAA 1997 as · any kind of property; or · a legal or equitable right that is not a property. According to section 149-10 of the ITAA 1997, a CGT asset that an entity owns is a pre-CGT asset if, and only if: · the entity last acquired the asset before 20 September 1985; and · the entity was not, immediately before the start of the 1998-99 income year, taken under: · former section 160ZZS(1) of the Income tax Assessment Act 1936; or Subdivision C of Division 20 of the former Part IIIA of that Act; · to have acquired the asset on or after 20 September 1985; and · the asset has not stopped being a pre-CGT asset of the entity because of this Division. Under subsection 149-30(1) of the ITAA 1997: The asset stops being a *pre-CGT asset at the earliest time when majority underlying interests in the asset were not had by ultimate owners who had majority underlying interests in the asset immediately before 20 September 1985. Section 149-15 of the ITAA 1997 defines what majority underlying interests in a CGT asset as follows: · more than 50% of the beneficial interests that ultimate owners have (whether directly or indirectly) in the asset; and · more than 50% of the beneficial interests that ultimate owners have (whether directly or indirectly) in any ordinary income that may be derived from the asset. An underlying interest in a CGT asset is a beneficial interest that an ultimate owner has in the asset or in any ordinary income that may be derived from the asset: subsection149-15(2) of the ITAA 1997. In the present case, X Pty Ltd acquired the CGT asset, namely the land, before 20 September 1985. The majority underlying interest of the ultimate owner of X Pty Ltd, namely, Y PLC, is maintained from its incorporation in 1959 till subdivision of the land and its sale. Therefore, the pre-CGT status of the land has not stopped and will not be subject to CGT when the land will be subdivided and sold.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.