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This edited version has been archived due to the length of time since original publication.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.

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Edited version of your private ruling

Authorisation Number: 1012549595186

Ruling

Subject: Capital gains tax

Question

Are you entitled to declare X% of the capital gain from the sale of the property if your ex-spouse receives Y% of the proceeds as part of your divorce settlement?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2013

The scheme commences on:

1 July 2012

Relevant facts and circumstances

The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:

You and your ex-spouse purchased land.

The title of the land is in your name only.

A joint bank loan was taken out by you and your ex-spouse to finance the purchase of the land.

The land was sold in the rrelevant financial year in accordance with a family court order.

Your ex-spouse is entitled to receive Y% of the proceeds from the sale of this property. You will receive the remaining X%.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 102-20

Income Tax Assessment Act 1997 Section 104-10

Reasons for decision

Capital gains tax (CGT) is the tax that you pay on certain gains you make. You may make a capital gain as a result of a CGT event, happening to an asset in which you have an ownership interest. The most common CGT event, CGT event A1, occurs when you dispose of your ownership interest in a CGT asset to another entity.

When considering the disposal of your interest in a property, the most important element in the application of the CGT provisions is ownership. It must be determined who is the legal owner of the property. In absence of evidence to the contrary, property is considered to be owned by person(s) registered on the title.

Taxation Ruling TR 93/32 (TR 93/32) deals with the division of net income or loss between rental property co-owners. If the equitable interest does not follow the legal title, there is some basis for the profit or loss to be distributed on the equitable and not the legal basis. However, paragraph 41 of TR 93/32 states the following:

While this ruling deals with net income or loss from a rental property, paragraph 42 explains that any capital gain or loss should be apportioned on the same basis.

In this case, legal title to the land was in your name. As you are the legal owner of the property, you will be responsible for any capital gains tax liability. It is the ownership of the asset when it is disposed of that determines the CGT liability, not who will ultimately retain the proceeds of the sale.

Therefore, the entire capital gain is assessable to you as the legal owner of the property.

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