| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your private ruling
Authorisation Number: 1012155163392
This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
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.
Ruling
Subject: Capital gains tax
Questions and answers
Are you required to pay capital gains tax on a property purchased prior to 20 September 1985?
No.
Is there a capital gains tax event when the title registration is altered from joint tenants to tenants in common?
No.
This ruling applies for the following periods:
Year ending 30 June 2012
The scheme commenced on:
1 July 2011
Relevant facts and circumstances
You and your spouse purchased a building prior to 1985.
This property was held in joint tenants.
You and your spouse severed your joint tenancy and from that point held the property as tenants in common.
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 108-7.
Reasons for decision
You only make a capital gain or capital loss if a capital gains tax (CGT) event happens to a CGT asset. Land and buildings are specifically listed under section 108-5 of the ITAA 1997 as CGT assets.
A capital gain or capital loss you make on the disposal of an asset is disregarded if you acquired the asset before 20 September 1985 (pre CGT).
In your case your property was purchased prior to the implementation of the Capital gains legislation.
Therefore, capital gains tax will not apply to the disposal of your pre CGT property.
Severing joint tenants
Section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a capital gains tax (CGT) event occurs when a CGT asset is disposed of. The disposal of an asset eventuates when a change of ownership takes place either because of some act/event or by operation of law.
By virtue of section 108-7 of the ITAA 1997, the CGT provisions apply as if by you owning the property as joint tenants, you would own the property as tenants in common in equal shares. Accordingly, the Commissioner takes the view that no CGT implications will arise when you (as joint tenants) convert your joint tenancy to a tenancy in common in equal shares (Taxation Determination TD 13).
After your change in ownership from joint tenancy to tenants in common, as you and your spouse each have a fifty percent interest in the properties, there was no change in your beneficial ownership. As such, there was no CGT event and no capital gain or loss was made when you severed your joint tenancy and became tenants in common.
There will be no CGT liability on the disposal of your property.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
