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Edited version of your written advice
Authorisation Number: 1051187172888
Date of advice: 6 February 2017
Ruling
Subject: Capital gains tax - Receivers - Application of Section 254
Question 1
Would the Taxpayers include a capital gain in their assessable income as a result of legal title to the Real Properties being re-issued and registered to the individual as a result of the Varied Court Orders?
Answer
No
Question 2
Would the Taxpayers be required to prepare and lodge income tax returns in their capacity as receivers?
Answer
No. Given the facts provided.
Question 3
Would the Taxpayers calculate net capital gains in their capacity as receivers on the basis that they are representatives of the individuals, and as such calculate the underlying capital gains on the Real Properties based on the individual's cost base of the Real Properties and apply main residence CGT exemption to the sale of the Main Residence Property (to the extent available) and / or the general CGT discount to the Real Properties (to the extent available)?
Answer
No. The Taxpayers are not required to calculate the net capital gains as they are not required to furnish an income tax return. The responsibility to furnish an income tax return and pay any tax assessed therein rests with the individual.
Question 4
Would the Taxpayers be required to pay tax in their capacity as receivers?
Answer
No. The obligation to pay any assessed tax in respect to the sale of the Properties rests with the individual.
Question 5
Would the Taxpayers be required to retain out of money which comes to them in their capacity as receivers so much as is sufficient to pay tax which is or will become due in respect of income, profits or gains?
Answer
No. Given the nature of the Taxpayers appointment section 254 of the Income Tax Assessment ACT 1936 (ITAA 1936) will not apply.
Question 6
Would the Taxpayers be personally liable for the tax payable to the extent that they have retained (or should have retained) an amount of money sufficient to pay tax?
Answer
No. Given the nature of the Taxpayers appointment section 254 of the ITAA 1936 will not apply.
Question 7
Would the Taxpayers include any amount in their assessable income under Division 6 of Part III of the ITAA 1936?
Answer
No
Question 8
Would the Taxpayers include any amount in their assessable income (in their personal capacity as opposed to in their capacity as receivers) in respect of the Real Properties, other than their fees for services which would be ordinary income?
Answer
No. Given the nature of the Taxpayers appointment section 254 of the ITAA 1936 will not apply.
This ruling applies for the following period(s)
Year ended 30 June 201B
Year ending 30 June 201C
Year ending 30 June 201D
The scheme commences on
01 July 201A
Relevant facts and circumstances
The Taxpayers were appointed by the court as receivers with the power to sell two properties.
There was a variation to the initial order to give effect to the appointment as receivers, rather than as trustees. This part of the orders were varied nunc pro tunc.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 6(1)
Income Tax Assessment Act 1936 Section 254
Income Tax Assessment Act 1997 Part 3-1
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 110-25
Reasons for decision
We consider that to give effect to the intention of the Varied Court Orders which were made nunc pro tunc (giving them retrospective effect) that the transfers of the Real Properties between the Trustees and the individual should be treated as if they never happened. Therefore no CGT event is considered to have occurred in relation to the initial court order.
The Real Properties are not vested in the Taxpayers. They are acting as receivers with the power to sell the properties. There is no trust created over the properties.
There would be no CGT event at the time the Taxpayers were appointed receivers, under the Court Order, with the power to sell the properties. The ownership of the properties remains with the individual until they are ultimately sold to a third party.
The Taxpayers should not include any amount in their assessable income under Division 6 of Part III of the ITAA 1936. The properties are held in the individual's name and they are the entity disposing of the property for capital gains tax purposes and any gains would be included in their calculation of assessable income.