Edited version of private ruling

Authorisation Number: 1011770094715

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Ruling

Subject: Capital Gains Tax

Whether a proposed transfer of assets will be subject to Capital Gains Tax (CGT).

Question

Does CGT event A1 in section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) happen if the Trusts transfer their assets directly to their unit holders?

Advice

Yes

This ruling applies for the following period

1 July 2010 to 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

Mr X and Mrs X are members of the X Superannuation Fund (the Super Fund). Both are aged 60 years and also retired.

The Super Fund is a unit holder in two Trusts (the Trusts).

The main assets of the Trusts are real estate and shares in listed companies.

Pursuant to their retirement, Mr and Mrs X request to be paid out their full benefits within the Super Fund. This involves transferring the assets held by the Trusts to the relevant unit holders and then to Mr and Mrs X. This means that all assets currently in the name of the Trusts will be in the name of Mr and Mrs X.

There will be no change in the beneficial ownership of the asset as a result of the transfer.

Upon the transfer of the assets, the Trusts and the Super Fund will be wound up.

A ruling is sought as to whether the proposed transfer of the assets will be subject to CGT.

Assumptions

None

Relevant legislative provisions

Section 104-10 of the Income Tax Assessment Act 1997

Subsection 104-10(1) of the Income Tax Assessment Act 1997

Section 102-20 of the Income Tax Assessment Act 1997

Section 104-5 of the Income Tax Assessment Act 1997

Subsection 108-5(1) of the Income Tax Assessment Act 1997

Subsection 108-5(2) of the Income Tax Assessment Act 1997

Reasons for decision

Summary

CGT event A1 in section 104-10 of the Income Tax Assessment Act 1997 will happen if the Trusts transfer their assets directly to their unit holders.

The assets to be transferred are CGT assets under subsection 108-5(1) of the ITAA 1997 and a change in ownership will occur meaning that CGT event A1 has been triggered.

Detailed reasoning

Section 104-10 of the ITAA 1997 looks at the disposal of a CGT asset under CGT event A1. Under subsection 104-10(1) CGT event A1 happens if a CGT asset is disposed of.

What is a CGT asset?

Under subsection 108-5(1) of the ITAA 1997, a CGT asset is:

· any kind of property; or

· a legal or equitable right that is not property.

Examples of CGT assets are land and buildings and shares in a company as per Note 1 under subsection 108-5(2) of the ITAA 1997.

What is CGT event A1?

Under section 104-5 of the ITAA 1997, CGT event A1 is the disposal of a CGT asset. The timing of the event is when the disposal contract is entered into or, if there is no disposal contract, when the entity stops being the asset's owner.

If the trusts transfer their assets (mainly real estate and shares in listed companies) to their unit holders then the requirements for CGT event A1 to happen are satisfied as there will be a change in the ownership of the assets from the trusts to the unit holders. This is the case notwithstanding that there has been no change in the beneficial ownership of the assets as a result of the proposed transfer.