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Edited version of private advice
Authorisation Number: 1051572806519
Date of advice: 29 August 2019
Ruling
Subject: Income tax - capital gains tax - pre-CGT assets
Question
Is the Commissioner satisfied that the majority underlying interest in the asset have been held by the same ultimate owners, at all times from immediately before 20 September 1985 to the disposal of the asset?
Answer
Yes.
Division 149 of the Income Tax Assessment Act 1997 outlines the circumstances when an asset acquired before 20 September 1985 stops being a pre-CGT asset. An asset stops being a pre-CGT asset at the earliest time when majority underlying interests in the asset were not had by ultimate owners who had majority underlying interests in the asset immediately before 20 September 1985.
In this case, the ultimate owners who held majority underlying interests in entity A and its asset immediately before 20 September 1985 have been retained. Even though there has been the death of some family members and one shareholder acquired further shares, there have been no new shareholders or change in the membership of the family group. That is, there has been no change in the majority underlying interest. Therefore, the Commissioner finds it is reasonable to assume that the majority underlying interest in the asset has been held by the same ultimate owners at all times from immediately before 20 September 1985 to the disposal of the asset in 2019.
Further information can be found in the Australian Taxation Office Interpretative Decision ATO ID 2011/101 Income Tax Capital Gains Tax: Division 149 majority underlying interests - no new shareholders on ato.gov.au
This ruling applies for the following period:
Year ending 30 June 2019
The scheme commenced on
1 July 2018
Relevant facts
Entity A is an Australian resident.
Entity A acquired an asset prior to 20 September 1985. Entity A sold the asset in 2019.
On incorporation of entity A, shares were issued.
Since then, some shares were transferred to other family members as beneficiaries of deceased estates.
One shareholder acquired further shares in entity B. Entity B has pre-CGT shares in entity A.
Under the relevant Memorandum of Association, entity A's shareholders have the right to participate in the profits and assets of the company equally.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 149-30
Income Tax Assessment Act 1997 Division 149
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