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Edited version of your private ruling
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Ruling
Subject: transfer of shares
Question and answer
If you transfer shares to a beneficiary as they are no longer a minor are you subject to CGT?
No
This ruling applies for the following periods:
Year ended 30 June 2012
The scheme commences on:
1 July 2011
Relevant facts and circumstances
You invested shares and funds in a bank account in the name of yourself and Person A.
You established a bank account to facilitate the purchase of shares and to have dividends from the shares paid into on behalf of Person A.
It was established as a "trustee for" account.
You have been including all dividends and interest on your tax return.
There is no formal trust existing and no trust deed.
You intend to transfer the shares to Person A.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 106-50
Reasons for decision
You can only make a capital gain as a result of a Capital gains tax (CGT) event happening. CGT event A1 happens when you dispose of a CGT asset, in this case shares.
When you dispose of a CGT asset, there is a change in ownership of the asset from you to another entity. Generally, any capital gain or capital loss that you make upon the disposal of an asset is based upon legal ownership. Therefore, there is no CGT event if there is no change in ownership of the shares.
Taxation Ruling IT 2486 considers the question of who should be liable for tax on income derived on bank accounts that are referred to as children's savings accounts. Although IT 2486 considers saving accounts specifically, the principles are equally applicable to income derived from other forms of investments such as a share account held on behalf of children.
IT 2486 explains that regardless of the name and type of the account, the essential question that must be asked is: whose money is it? The answer to this question is based on the facts of each particular case.
In your case, the money in the account was used to purchase the shares on behalf of Person A and to have the dividends from the shares paid into. It was established as a trustee for account.
You intend to transfer shares to Person A. In accordance with IT 2486, the shareholdings will be viewed as belonging to Person A.
Although you will transfer the shares to your Person A, the actual ownership of the shareholding does not change. You had no interest in the shareholding other than that existing by reason of the office of trustee. Therefore, there is no CGT event upon the transfer of shares from you to Person A. As no CGT event happened, you do not make a capital gain from the transfer of the shares.
Note: Person A as the beneficial owner of the shares is assessable on the dividends and not you as trustee. The income received from dividends and interest should have been declared by Person A. The income should not have been declared by you.
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