Private ruling: Capital gains tax
Published: December 2014
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Is a portion of the capital gain from the sale of the investment property attributable to you? | A1: Yes.

Relevant facts and circumstances: The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are: • the application for private ruling, • the contract of sale and • the minute of proposed consent orders. You and your ex-spouse owned a property. You each had a X% ownership in the property. As part of the property settlement, your ex-spouse was required to pay you an amount of money and the property was to be transferred to them. Your ex-spouse failed to make the payment and intentionally took action to prevent the sale of the property. In order to affect the sale of the property, the court orders allowed for the property to be transferred to you. The property has been sold and the proceeds have been allocated as per the orders.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 120-20

Reasons for decision: Summary: Under section 120-20 of the Income Tax Assessment Act 1997 (ITAA 1997), an entity will make a capital gain or a capital loss if a capital gains tax (CGT) event happens to a CGT asset. CGT event A1 occurs when you dispose of a CGT asset. You are considered to have disposed of a CGT asset if a change of ownership occurs from you to another entity because of some act or event or by operation of law. The capital gain or capital loss is made at the time of the event (section 104-10 of the ITAA 1997). | Detailed Reasoning - Beneficial ownership: A beneficial owner is defined in Taxation Ruling IT 2486 and Taxation Determination TD 92/106. A beneficial owner is the person or entity who is beneficially entitled to the income and proceeds from the asset. A legal owner is the individual who has their name on the legal documents associated with the capital gains tax (CGT) asset, an example would be the title deed for a property. An individual can be a legal owner but have no beneficial ownership in an asset. It is the beneficial owner of a CGT asset that is liable for capital gains tax upon sale of the assets. In some cases, an entity may hold a legal ownership interest in property for another individual in trust. | Detailed Reasoning - Application to your circumstances: In this case, you and your ex-spouse owned a property. The property was transferred to you in accordance with consent orders to enable you to affect the sale of the property. We consider that you were the beneficial owner of X% of the property and holding the remaining interest in the property on trust for your ex-spouse. Therefore, you are only liable for capital gains tax in relation to X% of the property.