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Edited version of your private ruling
Authorisation Number: 1012081628126
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Subject: Capital gains tax - Real property
Question:
Did you make a capital gain from the transfer of legal title to your child?
Answer:
Yes.
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts
You and your spouse purchased a property after 20 September 1985
The property was purchased for your child.
A mortgage was obtained to facilitate the purchase of the property
You were required by the incoming mortgagee, to be included as borrowers/ mortgagors.
You were subsequently included on the title to the property as tenants in common with your spouse and child in equal shares. This was an error by the solicitor engaged by you to undertake the purchase.
The correct ownership interest should have been in different proportions to this
You and your spouse's interests in the property were transferred to your child after 20 September 1985
You have made a capital gain as a result of this transfer.
You have provided documents which form part of, and should be read in conjunction with this private ruling:
Statutory declaration signed by you and your spouse
Transfer certificate
Title search
The following information has been obtained from these documents:
The property was only able to be purchased with a mortgage and with the names of you and your spouse being included as borrowers/ mortgagors.
The transfer of your interest in the property to your child has been completed.
The property was held as tenants in common in equal shares between you, your spouse and your child.
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 may arise when a capital gains tax (CGT) event happens to a CGT 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 to the property was transferred to your child, being your share as recorded on the title, this transfer has triggered CGT event AI and as such you will be liable for any CGT liabilities that follow.
Whilst we acknowledge and appreciate your particular circumstances, the Commissioner has no discretion to vary your legal interest in the property due to your particular circumstances.