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Edited version of your private ruling
Authorisation Number: 1051776121611
Ruling
Subject: Capital gains tax - ownership interest
Question:
Did Company A hold the Properties for capital gains tax purposes at the time of their sale?
Answer:
No. Based on the information provided the Commissioner accepts that for capital gains tax purposes Company A held the Properties on trust for The Trust and was not the owner of the Properties in its own right when they were sold.
This ruling applies for the following period
Income year ending 30 June 201X.
The scheme commences on
1 July 201X.
Relevant facts and circumstances
Trust X was created prior to 20 September 1985. It was established to be a unit holder in a unit trust, being the Unit Trust, which purchased a property jointly with family members of Person A.
Trust X's trust deed included the following:
· Trustee being Company A; and
· Trustee's general powers included the power to apply and invest all moneys forming part of the trust fund in any investments and to borrow or raise moneys to be used in deriving income or gain of the trust fund.
The directors of Company A were Persons A and B.
After several years a Deed of Variation and Deed of Settlement was prepared to change the name of Trust X to Trust A (The Trust). Other than the change in name, the original Trust Deed of Trust X continued to have effect in accordance with the terms contained in the deed.
The Trust is registered with Australian Business Number (ABN).
Persons A and B signed the contract of purchase for several properties in their roles as director and director/secretary of Company A which included the following information:
|
Buyer |
Company A, with its Australian Company Number (CAN) provided |
|
Purchase price |
$X,XXX,XXX |
The properties were on several Deposited Plans and are collectively referred to as the Properties.
Company Z sent a letter of offer to the directors of Company A in relation to several loan facilities which included the following information:
|
Borrower |
Company A in its own capacity and/or in its capacity as Trustee for The Trust |
|
|
Loan 1 |
Approved budget limit |
$XXX,XXX |
|
Loan 2 |
Amount |
$XXX,XXX |
|
Loan 3 (the Loan) |
Term loan purpose |
Purchase property |
|
Amount |
$X,XXX,XXX |
|
Company Z issued a statement to Company A in relation to the Loan which outlined that:
· the overdraft limit was $X,XXX,XXX
· a cheque for $X,XXX,XXX had been paid; and
· the balance of the account was a debit of $X,XXX,XXX.
· Company A as trustee for Trust X held a bank account with a banking institution, being The Bank, which included a drawdown of $X,XXX,XXX.
Company Z issued a statement to Company A in relation to the Loan which outlined that:
· the opening balance for the end of the statement period was a debit of $X,XXX,XXX
· a cash deposit of $X,XXX,XXX had been made during the statement period; and
· the balance of the account as at the end of the 200X income year was $0.
A depreciation schedule was prepared for Company A as trustee for The Trust for the 200X-0X income year which included amounts relating to property improvements at the Properties.
A trial balance was prepared for The Trust for the 200X-0X income year which included amounts in relation to:
· interest paid in relation to the Properties
· the purchase of the Properties
· improvements to the Properties
· the Loan from Company Z; and
· the loan from the Bank.
Person A passed away 200X with probate on their estate being granted on during the following year.
Following Person A's passing, Person B became the sole director of Company A.
After a significant period, Person B in their role as director of Company A signed a sale of contract of the Properties which included the following information:
|
The Seller |
Company A ATF The Trust |
|
The Property |
The Properties |
|
Sale price |
$X,XXX,XXX |
|
Acceptance by seller |
Company, with: · its Australian Company Number being quoted; and · the ABN of The Trust being quoted. |
|
Signed by the sellers pursuant to its constitution and the Corporations Act 2001 |
Signed by Person B in their role as director |
The sale of the Properties was settled several months after the contract of sale was entered and a capital gain was made on the sale.
Company A has the following registrations:
· Australian Company Number (ACN) registered prior to 20 September 1985
· ABN active from 200X; and
· Tax File Number registered in 200X.
Company A lodged its first income tax return in the 200X-0X income year.
A recent screenshot from Company Y, being the former Company Z, recorded Company A with The Trust's ABN.
Relevant legislative provisions
Income Tax Assessment Act 1997 Part 3-1