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Edited version of private advice
Authorisation Number: 1051629091328
Date of advice: 24 January 2020
Ruling
Subject: Income Tax - Capital Gains Tax
Question 1
Is any capital gain or capital loss disregarded when transferring the property from the company to two individuals?
Answer
Yes. In your case it is considered that as each owner has exclusive rights to a particular residential property which meets the requirements of sections 118-42 and 124-190 of the Income Tax Assessment Act 1997 (ITAA 1997). Additionally there has not been a material change either in the identity of the persons who hold interests in the property before the conversion/transfer and those who hold interests in the property after the conversion/transfer. Therefore the company can disregard any capital gain or loss that it makes upon the transfer of the property to the shareholders.
Question 2
Can you choose the capital gains tax (CGT) rollover relief under section 124-190 of the ITAA 1997 on the transfer of the property to individual titles?
Answer
Yes. Having regard to your full circumstances, the Commissioner is satisfied that it is appropriate that the CGT roll-over relief under section 124-190 of the ITAA 1997 applies in your situation.
This ruling applies for the following period
Year ended 30 June 2020
The scheme commences on
1 July 2019
Relevant facts and circumstances
Entity A and entity B each own shares in a company.
There are two classes of shares within the company's constitution, A class and B class shares.
Entity A owns x A class shares. Entity B owns x B class shares.
The company owns one lot of land. There are multiple properties on the lot.
The company title in conjunction with the company's constitution gives each entity A and B exclusive rights to a particular property. That is, the shares give each entity exclusive beneficial ownership in a particular property. Entity A and entity B own the property via company title. This is an older form of ownership before strata title was introduced.
Under the constitution, entity A and entity B is responsible at their own cost for the maintenance and upkeep of the respective property.
The company will transfer the respective property to each corresponding shareholder.
No consideration is being paid for or received in relation to the transfer.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 102-20
Income Tax Assessment Act 1997 section 124-190
Income Tax Assessment Act 1997 section 118-42