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Edited version of your private ruling
Authorisation Number: 1012466453298
Ruling
Subject: CGT - disposal of shares
Question 1
Will transferring shares from joint ownership to individual ownership result in a capital gain?
Answer
Yes
This ruling applies for the following periods
Year ended 30 June 2013
The scheme commenced on
1 July 2012
Relevant facts and circumstances
You purchased shares with your sibling in 19XX. These shares were purchased in joint names.
During your period of ownership, bonus shares have been issued, and you have a current balance of Y shares.
All income has been split equally between you and your sibling during the period of ownership.
All bonus shares have also been held in joint names.
You would like to split the shares and each hold 50% of the current balance of shares in your individual names.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10(2)
Income Tax Assessment Act 1997 Subsection 116-30(1)
Reasons for decision
Detailed reasoning
A disposal of assets from one party to another gives rise to capital gains tax (CGT) event A1, as the party is no longer deemed to be the beneficial owner of those assets.
Section 104-10(2) of the Income Tax Assessment Act 1997 (ITAA 1997) states that:
you dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law.
Where two individuals transfer two assets, which were previously owned jointly, into individual names, they are deemed to have disposed of 50 percent of their ownership and this triggers CGT event A1. A CGT event occurs because ownership of the asset has changed and the two parties no longer own 50 percent of two assets, but 100 percent of one asset each.
Under Subsection 116-30(1) of the ITAA 1997:
If you received no capital proceeds from a CGT event, you are taken to have received the market value of the CGT asset that is the subject of the event. (The market value is worked out as at the time of the event.)
When two parties transfer capital assets between themselves, if no capital proceeds are paid, or the proceeds are more or less than the market value on the date of the transfer, then the parties are taken to have disposed of their interest at the asset's market value on the date of the transfer.
In your case, if you proceed with splitting the shares and transferring them into individual names, you will have disposed of 50 percent of your interest in the shares to your sibling for their market value on the date of the transfer of the shares from joint ownership to individual ownership.
Therefore, you will now have acquired one 50 percent interest on the date you originally acquired the shares, and the other 50 percent on the date of the transfer from joint ownership to your individual ownership.