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Edited version of your private ruling
Authorisation Number: 1012071978544
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Subject: Capital gains tax - Real property
Question:
Are you subject to capital gains tax (CGT) as a result of a change in title to property held in joint names?
Answer:
Yes.
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
You purchased with other parties a property after 20 September 1985.
The property is less than 2 hectares and consists of 2 connected dwellings. Property 'A and Property 'B'
The property was purchased with other parties and in the following proportions:
1. X% in your name
2. y% in another parties name
3. y% in another parties name
4. y% in another parties name
The purchase of the property was initially obtained through a mortgage with an Australian bank and then with another Australian bank.
The parties have made contributions in proportion to their ownership interests.
The properties were rented for a period of time.
After a period of time you moved into property 'A' and this is now your main residence
The other property continues to be used to produce income.
You obtained a loan to renovate property 'A'
The parties decided to obtain two titles to the property, new titles were issued in the original ownership proportions.
You will now transfer your interest in property 'B' to the other parties and the other parties will transfer their interests in property 'A' to you.
You will make a capital gain as a result of the transfer of your ownership interest in property 'B'.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 108-5
Income Tax Assessment Act 1997 Subsection 104-10(1)
Income Tax Assessment Act 1997 Subsection 104-10(2)
Reasons for decision
A capital gain or a capital loss may arise if a capital gains tax (CGT) event happens to a capital gains tax asset. Section 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a CGT asset is any kind of property, or a legal or equitable right that is not property.
Under section 104-10 of the ITAA 1997 the disposal of a CGT property asset causes a CGT event A1 to occur. You dispose of an asset when a change of ownership occurs from you to another entity.
In your case, when title is transferred to you, this will trigger CGT event AI and as such you will be liable for any CGT liabilities that follow.
In this situation, you will dispose of your interest in property ''B' and acquire a new interest in property 'A'. It is the transfer of your ownership interest in property 'B' which will trigger the A1 event.
Whilst we acknowledge and appreciate your particular circumstances, the Commissioner does not have discretion to disregard any capital gain that you are liable for as a result of the transfer.