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Edited version of your private ruling
Authorisation Number: 1012549595186
Ruling
Subject: Capital gains tax
Question
Are you entitled to declare X% of the capital gain from the sale of the property if your ex-spouse receives Y% of the proceeds as part of your divorce settlement?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2013
The scheme commences on:
1 July 2012
Relevant facts and circumstances
The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:
· the application for private ruling,
· the Transfer of Land documentation, and
· the Family Court Order.
You and your ex-spouse purchased land.
The title of the land is in your name only.
A joint bank loan was taken out by you and your ex-spouse to finance the purchase of the land.
The land was sold in the rrelevant financial year in accordance with a family court order.
Your ex-spouse is entitled to receive Y% of the proceeds from the sale of this property. You will receive the remaining X%.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-20
Income Tax Assessment Act 1997 Section 104-10
Reasons for decision
Capital gains tax (CGT) is the tax that you pay on certain gains you make. You may make a capital gain as a result of a CGT event, happening to an asset in which you have an ownership interest. The most common CGT event, CGT event A1, occurs when you dispose of your ownership interest in a CGT asset to another entity.
When considering the disposal of your interest in a property, the most important element in the application of the CGT provisions is ownership. It must be determined who is the legal owner of the property. In absence of evidence to the contrary, property is considered to be owned by person(s) registered on the title.
Taxation Ruling TR 93/32 (TR 93/32) deals with the division of net income or loss between rental property co-owners. If the equitable interest does not follow the legal title, there is some basis for the profit or loss to be distributed on the equitable and not the legal basis. However, paragraph 41 of TR 93/32 states the following:
We consider that there are extremely limited circumstances where the legal and equitable interests are not the same and that there is sufficient evidence to establish that the equitable interest is different from the legal title. We will assume where taxpayers are related, e.g., husband and wife, that the equitable right is exactly the same as the legal title.
While this ruling deals with net income or loss from a rental property, paragraph 42 explains that any capital gain or loss should be apportioned on the same basis.
In this case, legal title to the land was in your name. As you are the legal owner of the property, you will be responsible for any capital gains tax liability. It is the ownership of the asset when it is disposed of that determines the CGT liability, not who will ultimately retain the proceeds of the sale.
Therefore, the entire capital gain is assessable to you as the legal owner of the property.