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Edited version of your written advice
Authorisation Number: 1051193065636
Date of advice: 21 February 2017
Ruling
Subject: CGT Event E2
Question 1
Did CGT Event E2 happen on 1 July 1985 when the land transfer document was signed?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June 2017
Year ended 30 June 2018.
The scheme commences on:
Before 20 September 1985
Relevant facts and circumstances
A and B purchased a property (the property) sometime prior to 20 September 1985.
A and B transferred ownership of the property to a trustee by executing and signing a transfer of land document on a date sometime prior to 20 September 1985.
The transfer of the property was via a gift to the trust as no consideration was received.
A and B paid Stamp duty in relation to the above transfer to their solicitors on a certain date shortly after executing and signing the transfer document.
The Trustee became registered as the owner of the property a few months after executing and signing of the transfer document.
The Trustee managed the Discretionary Trust for the benefit of the beneficiaries which included A and B.
Relevant legislative provisions
Income Tax Assessment Act 1997, Section 104-60
Reasons for decision
CGT event E2 happens if a taxpayer transfers a CGT asset to a trust that exists at the time of the event ((Section 104-60(1) of the Income Taxation Assessment Act 1997 (ITAA 1997)).
The time of the CGT event is when the asset is transferred (Section 104-60(2) of the ITAA 1997).
The Commissioner in Healey v Commissioner of Taxation (WAD 188 of 2010) suggests that in common legal parlance transfer may encompass every legal means by which existing property may be passed from one person to another (applying Coles Myer Ltd v Commissioner of State Revenue (Vic) (1998) 4 VR 728).
The Commissioner and the court in this case also held the view that the breadth of variety of usage of 'transfer' in the CGT provisions supports the historical approach that 'transfer' is a word of wide import, not to be given a narrow construction unless the context so requires.
The court also distinguished the definition of 'disposal' from 'transfer', with the disposal of an asset, for example CGT event A1 being limited to where there is actually a change in ownership of an asset from one person to another. By contrast, the court said that the transfer of an asset to a trust is taken to be the creation, by settlement of a trust over the asset. This suggests that where there is no more than the creation of a trust by way of settlement (including the transfer of an asset to the trust), that will be deemed to be a change in ownership of the asset for CGT provisions.
In your case, the transfer of property by A and B was effectuated on a date sometime prior to 20 September 1985 when the transfer documents were signed by the Trustee and A and B. The actions of the transferors were effective, as they had done all that needed to be done to effectively transfer their real property interest to the trust.