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Ruling
Subject: Capital gains tax
Question and answer:
Are you assessable on all of the capital gain made on a block of land held in joint names?
No.
This ruling applies for the following period:
Year ended 30 June 2012
The scheme commenced on:
1 July 2011
Relevant facts
You purchased a block of land with another person a number of years ago.
This land is held as joint tenants.
Your relationship ended after the land was purchased.
You continued to pay all expenses associated with the land, rates, loan repayments etc.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-20.
Income Tax Assessment Act 1997 Section 104-10.
Reasons for decision
Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a capital gain or loss is made as a result of a CGT event. The most common event is CGT event A1 which happens when a CGT asset is disposed of. A person is deemed to have disposed of a CGT asset if a change in ownership occurs from them to another entity (section 104-10 of the ITAA 1997).
Liability for CGT is generally determined by ownership of the CGT asset at the time of the CGT event. In the case of the sale of land, any net capital gain from the disposal is included in the legal or beneficial owner's assessable income by section 102-5 of the ITAA 1997.
In the case of land, a taxpayer is deemed to have an ownership interest in the land if they have a legal interest in the land. Generally, a legal interest in land is achieved by the owner being the registered proprietor of the legal title to the land. In cases where land is jointly owned by more than one owner, either as tenants in common or joint tenants, each owner makes a capital gain or loss in line with their interest in the land. Where there are two owners holding 50% each of the land both owners share a capital gain or loss equally.
You and the other friend purchased the block of land a number of years ago as joint tenants.
CGT event A1 happened when you disposed of the land to a third person. The time of the event was when you entered into the contract to sell the land.
As you owned the property as joint tenants you must share the capital gain or loss realised when the land was disposed of and declare 50% of any loss or gain in each of your tax returns.