Private ruling: Capital gains tax - deceased estate - personal use asset disposal
Published: April 2014
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Did a capital gains tax (CGT) event occur in the 2012 income year? | A1: Yes. | Q2: Do you disregard a capital loss owed to you by X Pty Ltd? | A2: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-5 | Income Tax Assessment Act 1997 Paragraph 104-25(1)(b) | Income Tax Assessment Act 1997 Subsection 104-25(3) | Income Tax Assessment Act 1997 Section 108-5 | Income Tax Assessment Act 1997 Paragraph 108-20(2)(d)

Reasons for decision: Summary: A CGT event C2 happens when a cancellation, surrender or similar ending happens in relation to your CGT asset. Section104-25 of the ITAA 1997 prescribes that a CGT event C2 will happen if your ownership of an intangible CGT asset ends as a result of the asset: (a) being redeemed or cancelled; (b) being released, discharged or satisfied; (c) expiring; (d) being abandoned, surrendered or forfeited; (e) if the asset is an option - being exercised; or (f) if the asset is a convertible interest - being converted. Subsection 104-25(2) of the ITAA 1997 states that the time of a CGT event C2 (where there ending of the asset is not brought about by contract) is when the asset ends. Under subsection 104-25(3) of the ITAA 1997 you make a capital loss when a CGT event C2 happens where the capital proceeds from the event are less than the asset's cost base. Section 108-20 of the ITAA 1997 states that in calculating your net capital gain or capital loss for an income year, any capital loss you make from a personal use asset is disregarded. A personal use asset is taken to include the following: a) a CGT asset used or kept mainly for your or your associates personal use and enjoyment; b) an option or a right to acquire a CGT asset of the type referred to at a); c) a debt arising from a CGT event in which the CGT asset that was the subject of the CGT event was of the type referred to at a); or d) a debt arising other than in the course of gaining or producing your assessable income or from carrying on your business. The debt incurred under the licence to occupy is a personal use asset and as a result any capital loss is disregarded.

Relevant facts: The deceased passed away in the relevant income year. | The deceased entered into a licence to occupy agreement with the owner of an aged care facility X in the 200X income year. | The deceased had another residence and elected to treat this dwelling as their main residence. | The deceased contributed an amount as consideration to enter into the licence to occupy. | The deceased resided in a unit of the facility. | You have provided a number of documents which forms part of this private ruling: | We have obtained the following information from these documents: | Under clause 2 (c) the entry contribution is a loan from the resident to the owner which is repayable by the owner on the earlier of the date that the new entry contribution is disbursed to the resident under clause 7 less deductions or on Y. No interest will be payable to the resident by the owner for the use of the entry contribution. | X (in liquidation) has been deregistered and there were insufficient assets to enable a distribution to any class of creditor.