Edited version of your private ruling

Authorisation Number: 1012435988824

Ruling

Subject: Capital gain tax provision

Question and answer:

Will the assets that were acquired on your behalf prior to 20 September 1985 maintain their pre-capital gains tax status when the ownership title is transferred to you?

Yes.

This ruling applies for the following period:

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commenced on:

1 July 2012

Relevant facts

Your parents opened a bank account for you when you were a minor.

The account was opened as a 'in trust for' account due to the banks not allowing accounts to be opened in the name of minors only.

The funds that were accumulated in the account were made up from cash gifts from your grandparents and parents, child endowment payments and so on.

These sums of money accumulated over a period of time and were used by your parents to purchase shares on your behalf.

Due to companies unable to list you (as a minor) on the ownership title of shares, the ownership title of the shares was registered under your parent's name.

All dividends, proceeds from takeovers etc, were deposited into your trust account and used to purchase additional investments.

Due to the changes on taxation on children's income which were introduced in 1986, your parents submitted an income tax return in your name together with detailed explanations.

Since 1986 an annual income tax return has been lodged under your name.

As a result of these investment activities, shares have been acquired pre 20 September 1985 and post 20 September 1985.

At no stage have your parents benefitted from the funds or investments.

Now that you are no longer a minor, you are wishing to have the ownership title of the investments transferred to your name.

Relevant legislative provisions

Income Tax Assessment Act 1997, Section 104-10

Reasons for decision

Will a CGT Occur

Section 104-10 of the ITAA 1997 provides a list of events that are subject to CGT provisions. The most common CGT event is CGT event A1. CGT event A1 happens when you dispose of an asset to someone else, for example if you sell shares.

When considering whether the transfer of title of an asset is a disposal, the most important element in the application of the CGT provisions is ownership. Both legal and beneficial ownership must be determined.

TAXATION RULING NO. IT 2486 INCOME TAX:CHILDREN'S SAVINGS ACCOUNTS, discusses the Commissioner's view of who has ownership of money held in a child's bank account, and therefore who should pay tax on the interest earned in the child's bank account?

Paragraph 5 of Tax Ruling IT 2486 states,

5. The answer to the question 'Whose money is it?' must inevitably depend upon the facts of each case. If, for example, the account is made up of money the child has received as birthday or Christmas presents, pocket-money or money from newspaper rounds, childminding, etc., then the money in the account should be regarded as that of the child.

Although IT 2486 deals specifically with children's bank accounts, the same principles can also be applied to other assets such as shares.

In your case, your parents opened a 'in trust' bank account in trust for you as the bank's policy did not allow accounts to be opened under the name of a minor. The bank account accumulated funds from cash gifts from your grandparents and parents, as well as child endowment payments. The funds from the accounts were used to purchase assets on your behalf. At no stage did your parents benefit from any of the funds or transactions that occurred. Therefore consistent with the principles established in IT 2486, it is accepted the assets belong to you, and therefore the transfer of ownership will not trigger a CGT event.

Accordingly, as a CGT event will not occur when the ownership title of the assets are transferred to you, any assets that were purchased prior to 20 September 1985 will maintain their pre-CGT status.