Edited version of private ruling

Authorisation Number: 1011579786105

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Ruling

Subject: Capital gains tax - subdivision of land

Question 1: Will transferring the trustee's interest in one of the blocks of land into your name trigger a capital gains tax (CGT) event to you?

Answer: No.

Question 2: Will any capital gain or capital loss you make from the sale of your interest in the other block of land be disregarded?

Answer: Yes.

This ruling applies for the following period<s>:

2010-11 income year

The scheme commences on:

1 July 1986

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.

You acquired a property with your former spouse before 1985. The property was your main residence till your separation after 1985. After this and to the present time, the property has been used by you and your children as your main residence.

Per an order of the Family Court of Australia dated after 1985, your spouse's half share of the property was transferred to you as trustee for your children. You, in an indenture, declared that you hold a moiety of one half of the property as trustee for the children.

You now wish to give your children their half share of the property, but wish to stay in the same location. You thus intend to demolish the house, subdivide the property, retain one block for yourself and build a new residence on it for you, sell the other block and pay your children out their share of the property.

For the purpose of this private ruling, the current owners will subdivide the property into two.

The trustee will then transfer their interest in one of the subdivided blocks of land to you. You will then sell your interest in the other block of land.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 102-20

Income Tax Assessment Act 1997 Section 104-10

Income Tax Assessment Act 1997 Subsection 104-10(5)

Reasons for decision

Question 1

Summary

Transferring the trustee's interest in one of the blocks of land into your name will not trigger a CGT event to you.

Detailed reasoning

You can only make a capital gain or a capital loss if a CGT event happens.

CGT event A1 happens when the ownership of an asset changes from one person to another person. However, this CGT event is only relevant to the person who owned the asset immediately before the change of ownership.

CGT event A1 will not happen to you because you will not be the owner of this interest in the block of land immediately before the change of ownership happens.

Question 2

Summary

Any capital gain or capital loss you make from the sale of your interest in the other block of land will be disregarded.

Detailed reasoning

You disregard any capital gain or capital loss you make from the sale of your interest in the other block of land because you bought it before 1985 and the capital gains provisions only apply to property acquired on or after 20 September 1985 - it is a pre-CGT asset.

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