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Edited version of your written advice
Authorisation Number: 1051433770934
Date of advice: 25 September 2018
Ruling
Subject: Beneficial ownership of property to be transferred
Question 1
Will the proposed transfer of the property from R and to Company A and Company B as tenants in common in equal shares trigger a CGT event?
Answer
No.
Having considered the relevant factors, the Commissioner is of the opinion that there would be no CGT event upon the transfer of the property to the relevant companies as each company is absolutely entitled to its share of the property. Further information on CGT events can be found by searching ‘QC 51236’ on ato.gov.au
Question 2
Will the property retain its pre-CGT status after the proposed transfer?
Answer
Yes.
Under section 149-30 of the ITAA 1997, an asset stops being a pre-CGT asset at the earliest time when the majority underlying interests in the asset were not held by the ultimate owners who held majority underlying interests in the asset immediately before 20 September 1985. Having considered the relevant factors, the Commissioner is of the opinion that the property would retain its pre-CGT status as there has been no change in the property’s beneficial owners.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The property comprises of land.
In early 19AA the property was transferred to R and P as tenants in common in equal shares.
At the time R’s intention was to acquire the half share in the name of his/her family company, Company A, however, under the state land act, at that time, ownership by companies was prohibited.
In accordance with accepted practice at the time R and P jointly executed a document that they had acquired the property on behalf of Company A and Company C.
In early 19BB P transferred his/her share of the property to R’s spouse M as tenants in common in equal shares.
M had a similar issue to R in that he/she wanted to acquire the half share in the name of the family company, Company B, because of the restrictions he/she could not.
M accordingly signed a declaration that she obtained the property on behalf of Company B.
Company A paid for its share of the property originally when it was part of the operation jointly with Company C.
Company B financed the purchase of its share of the property and the operating entity paid rents to the landholding entity to service that debt.
In 19CC the property was converted to freehold and remained in the names of R and M.
R and M will be transferring the property into the names of the respective companies in order to enact their succession plans.
The property will be transferred to the companies in the 20XX financial year.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 104-10(2)
Income Tax Assessment Act 1997 section 149-15(1)
Income Tax Assessment Act 1997 section 149-30