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Edited version of your written advice
Authorisation Number: 1012772228463
Ruling
Subject: Capital gains tax
Question and answer
Are you liable for capital gains tax (CGT) based on your legal ownership of a property?
Yes.
This ruling applies for the following periods:
Year ending 30 June 2014
The scheme commenced on:
1 July 2013
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
The property is an investment property and is jointly owned.
The ownership interest is not split equally.
Consent orders set out that the proceeds from the sale of the investment property are to be distributed differently to that of the title deed.
Relevant legislative provisions
Income tax Assessment Act 1997 section 102-20
Income Tax Assessment Act 1997 Section 104-10
Reasons for decision
The CGT provisions are contained in Part 3-1 and 3-3 of the ITAA 1997. CGT is the tax you pay on certain capital gains you make. You make a capital gain or a capital loss when a 'CGT event' happens (section 102-20 of the ITAA 1997). The most common CGT event A1 happens when you dispose of the asset to another party (for example disposal of a dwelling) (section 104-10 of the ITAA 1997).
Any capital gain or capital loss made upon the disposal of the investment property will be based upon legal ownership. You and your spouse own the property X%-Y%; your capital gain will be based upon your ownership interest, which is X%-Y%
This is in accordance with Taxation Ruling TR 93/32, where it is stated that income from property must be shared according to legal interest of the owners except in those very limited circumstances where there is sufficient evidence to establish that the equitable interest is different from the legal title.
The legal ownership of the investment property is X%-Y% and the court has ordered that the distribution of the sale proceeds of the investment property be split U% and V% that does not change the ownership interests belonging to each owner.
The court order does not alter the legal ownership of the investment property as the order specifically applies only to the distribution of the proceeds and not the legal ownership.
The court order makes no mention that the legal ownership is to be changed.
Any CGT liability is required to be paid based on ownership interest in the investment property and not the proceed distribution as per the court order.