| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012906600226
Date of advice: 3 November 2015
Ruling
Subject: Capital gains tax - capital gains tax event - depreciating asset - non- taxable purpose
Question
Is the transfer of an aircraft to your spouse a capital gains tax event?
Answer
Yes.
Question
Is any capital loss able to be offset against future capital gains?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2015.
The scheme commences on
1 July 2014.
Relevant facts and circumstances
You purchased an aircraft in 20XX for an amount and registered the title to the aircraft in your name.
You transferred the ownership of the aircraft to your spouse in 20YY.
During your period of ownership the aircraft has done a number of flights and can be categorised as the following;
• private flights, partly business and personal use.
• training flights
• ferry flights (to and from maintenance base)
• charity flights (transporting people in need of medical assistance)
The organisation who engages you for the charity flights pays for all flight expenses, including fuel, airport fees and air navigation fees. The organisation does not pay you a fee for your services.
The aircraft was always available for lease while you owned it and for the non-taxable purposes mentioned above.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 40-35
Income Tax Assessment Act 1997 Section 40-40
Income Tax Assessment Act 1997 Section 102-20
Income Tax Assessment Act 1997 Section 104-235
Income Tax Assessment Act 1997 Section 104-240
Reasons for decision
CGT event K7 happened to the aircraft when you transferred the ownership of it to your spouse in as:
• The transfer was a balancing adjustment event, and
• You haven't used it wholly for income producing purposes while you owned it.
Any capital loss you make from CGT event K7 is disregarded if the aircraft is a personal use asset - that is an asset kept mainly for your (or your associate's) personal use and enjoyment.
Your main use of the aircraft has been for charity flights.
You have not kept the aircraft for your personal use and enjoyment. Therefore, it is not a personal use asset.
Calculating your capital gain or capital loss from CGT event K7
A capital gain or capital loss from the disposal of a depreciating asset will only arise to the extent that you have used the asset for a non- taxable purpose for example you used the asset for private purposes.
You calculate a capital gain or capital loss from a depreciating asset used for a non- taxable purpose using the uniform capital allowance concepts of cost and termination value and not the concepts of capital proceeds and cost base found in the capital gains tax (CGT) provisions.
You make a capital gain if the termination value of your depreciating asset is greater than it cost. You make a capital loss if the reverse is the case for example the asset's cost is more than its termination value.
If you make a capital loss, you can't claim it against income but you can use it to reduce a capital gain in the same income year. And if your capital losses exceed your capital gains in an income year, you can generally carry the loss forward and deduct it against capital gains in future years.