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Edited version of your written advice
Authorisation Number: 1013090972187
Date of advice: 15 September 2016
Ruling
Subject: Capital gains tax
Question 1
Did a capital gains tax (CGT) event occur when you accidentally transferred your shares into your company's name?
Answer
No.
Question 2
Will a CGT event occur when you transfer shares back into your name as an individual, from a company, correcting your accidental transfer?
Answer
No.
This ruling applies for the following period:
Year ending 30 June 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
You inherited shares.
You have held the shares under your personal name for over 15 years.
Your intention is to leave the shares for your children in the future.
Your shares were managed under Management 1.
You were recommended to transfer them to be managed to Management 2.
You had also discussed your investment portfolio for your company with Management 2.
When you transferred your shares from Management 1 to Management 2, you signed an off market transfer.
The result of the transfer was that the shares were transferred from your personal name to your company's name.
It was accidental that the shares were transferred from your name to your company's name.
You are entitled to any dividends paid on the shares.
You are entitled to any capital proceeds if you sell the shares.
No consideration was paid for the company to acquire the shares from you.
No consideration will be paid for you to acquire the shares from the company.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 104-10(2)
Reasons for decision
The CGT provisions apply when you dispose of an asset acquired on or after 20 September 1985. However, subsection 104-10(2) of the Income Tax Assessment Act 1997 (ITAA 1997) states that a change in the legal ownership of an asset without a change in the beneficial ownership will not constitute a disposal for CGT purposes.
A beneficial owner is defined in Taxation Ruling IT 2486 and Taxation Determination TD 92/106. A beneficial owner is the person or entity who is beneficially entitled to the income and proceeds from the asset.
A legal owner is the individual who has their name on the legal documents associated with the CGT asset, an example would be the title deed for a property. An individual can be a legal owner but have no beneficial ownership in an asset. It is the beneficial owner of a CGT asset that is liable for capital gains tax upon sale of the assets.
In some cases, an entity may hold a legal ownership interest in property for another individual in trust.
Application to your circumstances
We accept that you have maintained the beneficial ownership of the shares as you are entitled to any dividends paid on the shares and any capital proceeds if you sold the shares. Therefore, no CGT event has occurred.