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Edited version of your written advice
Authorisation Number: 1012792010496
Ruling
Subject: Capital gains tax
Question 1
Will capital gains tax (CGT) event A1 occur when you transfer X% of your ownership interest in the property to your spouse?
Answer
Yes
Question 2
Will the CGT discount apply to the CGT event?
Answer
Yes
Question 3
Will the proceeds of the CGT event be equal to X% of the market value of the property at the time of the CGT event?
Answer
Yes
This ruling applies for the following period:
Year ending 30 June 2015
The scheme commences on:
1 July 2014
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.
You purchased a residential property more than 12 months ago.
The property was leased for a period of time.
Subsequently, you have occupied the property as your main residence.
You intend to transfer X% of the ownership interest in the property to your spouse.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 102-25(1)
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 104-35
Income Tax Assessment Act 1997 Section 115-10
Income Tax Assessment Act 1997 Section 116-30
Reasons for decision
CGT event
CGT event A1 happens if the ownership of a CGT asset changes (section 104-10 of the ITAA 1997). You can dispose of part of a CGT asset under CGT event A1.
CGT event D1 happens if you create a contractual right in another entity (section 104-35 of the ITAA 1997). However, CGT event D1 will not occur if that right requires you to do something that is another CGT event that happens to you.
If more than one CGT event happens in respect of a transaction, the most specific event is to be used (subsection 102-25(1) of the ITAA 1997).
In this case, you intend to transfer X% of the ownership interest in the property to your spouse. You will effectively dispose of X% of the property. CGT event A1 is the most relevant CGT event in this case.
CGT discount
Under section 115-10 of the ITAA 1997, to qualify for the 50% general discount a capital gain must be made by an individual, a complying superannuation entity, a trust or a life insurance company. The capital gain must result from a CGT event happening after 11:45am on 21 September 1999 and must not have an indexed cost base. Also, the gain must result from a CGT event happening to an asset that was acquired at least 12 months before the CGT event.
Your acquisition date for the purposes of calculating CGT is more than 12 months before the CGT event. Accordingly, if the CGT event results in a capital gain you are entitled to apply the 50% general discount to the capital gain.
Capital proceeds
In accordance with section 116-30 of the ITAA 1997, you are taken to receive the market value of a CGT asset if you dispose of that asset and either:
• receive no capital proceeds; or
• receive capital proceeds that are more or less than the market value of the asset and did not deal at arm's length with the purchaser.
In this case, you will dispose of X% of the property when you transfer it to your spouse. Accordingly, your capital proceeds for the CGT event will be equal to X% of the market value of the property on the date of the event.