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Edited version of your private ruling

Authorisation Number: 1012335383689

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Subject: Capital gains tax - sale of bullion - disposal - splitting capital gain

Question:

Does the Commissioner accept that you held an interest in the bullion certificates on behalf of your relative?

Answer:

Yes.

This ruling applies for the following period:

Year ended 30 June 2012

The scheme commenced on:

1 July 2011

Relevant facts:

You and your relative purchased a precious metal as an investment.

Your relative transferred their share of the investment to you and you purchased the bullion in your name only.

You purchased the bullion in two separate transactions.

The proportion of the investment is as not in equal shares.

You and your relative decided to sell an amount of the precious metal and you received an amount of money.

The share of the investment was distributed in proportion to the initial investment.

You transferred the share of the proceeds of the investment to your relative.

You have provided a number of documents which forms part of and should be read in conjunction with this private ruling.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 104-10

Income Tax Assessment Act 1997 Section 109-5

Reasons for decision:

Capital gains tax (CGT) is the tax you pay on certain gains you make. You make a capital gain or capital loss as a result of a CGT event happening.

The most common event (CGT event A1) happens if you dispose of a CGT asset to someone else. In your situation, this will be the sale of the bullion.

When considering the disposal of an asset, the most important element in the application of the CGT provisions is ownership. It must be determined who is the legal owner of the assets.

In absence of evidence to the contrary, an asset is considered to be owned by the person who is the legal owner. Evidence may include documents that show the registered owner holds the property in trust for someone else.

It is possible for legal ownership to differ from beneficial ownership. Where beneficial ownership and legal ownership of an asset are not the same, there must be evidence that the legal owner holds the property in trust for the beneficial owner. We consider that the agreement between the parties reflects the position that you held a proportion of the bullion on trust for your relative.

In your case, your mother in law transferred money to you so that you would jointly invest the money in bullion, although you purchased the bullion in your name, it was always both parties intention that the bullion is jointly owned and in proportion to each parties financial contributions.

The subsequent sale of some of the bullion is a disposal of a CGT asset. You will need to calculate any capital gain made on your share of the proceeds of the sale and include the amount.

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