Edited version of private advice

Authorisation Number 1051630015149

Date of advice: 30 January 2020

Subject: Capital gains tax

Question

Are you able to disregard any CGT incurred on the transfer of your shares to your spouse?

Answer

No.

This ruling applies for the following period:

Year ending 30 June 2020

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You are employed as a professional for a relevant department.

You own shares in XXXX.

Your employer has recently introduced a policy.

As a result, you are required to dispose of your shares in as this is considered a conflict of interest by your employer.

You are transferring these shares to your spouse.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 112-140

Income Tax Assessment Act 1997 section 112-150

Income Tax Assessment Act 1997 section 126-5

Reasons for Decision

CGT applies to all changes of ownership of assets on or after 20 September 1985. The effect of a same asset roll-over is to allow the taxpayer transferor to disregard a capital gain or loss it makes from disposing of the CGT asset to the transferee, so that any capital gain or loss is deferred until a CGT event happens in relation to the asset in the hands of the transferee (section 112-140).

Section 112-150 of the ITAA 1997 sets out the rules for same assets roll-overs. You can't choose whether or not the roll-over applies.

1.    Transfer of a CGT asset from one spouse to the other because of a marriage or relationship breakdown

2.    Transfer of a CGT asset from a company or trust to a spouse because of a marriage or relationship breakdown

3.    Transfer of a CGT asset to a wholly-owned company

4.    Transfer of a CGT asset of a partnership to a wholly-owned company

4a. Transfer of a CGT asset of a trust to a company under a trust restructure

5.    Transfer of a CGT asset between certain related companies

6.    CGT event happens because a trust deed of a complying approved deposit fund, a complying superannuation fund or a fund that accepts worker entitlement contributions is changed

7.    Transfer of a CGT asset from a small superannuation fund to another complying superannuation fund because of a marriage or relationship breakdown

7. (Repealed by No 58 of 2006)

8.    Beneficiary becomes absolutely entitled to a share following a roll-over under Subdivision 124-M

9.    (Repealed by No 109 of 2014)

10.  Transfer of a CGT asset between certain trusts

11.  Corporations covered by Subdivision 124-I

In your case, you have been advised by your employer to dispose of your shares in XXXX. You wish to transfer these shares to your spouse. As per section 112-150 none of roll-overs apply to your circumstances. Accordingly, a roll-over is not available to defer or disregard the capital gain made on the transfer of your shares to your spouse.

The transfer of the ownership of the shares would be considered an A1 capital gains event and therefor would be subject to capital gains due to the transfer of ownership. The sale figure for the shares would be the market value at the time of the CGT event regardless of the actual consideration that is provided when the ownership of the shares is transferred.

It should be noted that the Commissioner can only apply the law as set out in the tax legislation which is created by Federal Parliament, and by precedents set down by the Administrative Appeals Tribunal, the Federal Court and the High Court.

The Commissioner is bound by the law and does not have the power to apply discretion if there is no provision for the discretion within the legislation.

Although we acknowledge your situation, the legislation is very specific as to the circumstances under which a taxpayer is entitled to use same asset roll-overs and unfortunately your situation is not one of those.