Private ruling: CGT event A1 - in-specie land distribution
Date of advice: 16 January 2026
Published: 2 March 2026
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Did CGT event A1 occur under section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) when you distributed the property on DD MM 20XX? | A1: Yes. | Q2: Did a franking debit arise in your franking account under section 205-30 of the ITAA 1997 as a result of the distributions you made on DD MM 20XX? | A2: No.

Relevant facts and circumstances: Company Pty Ltd (you) were incorporated on DD MM 19XX. Your liquidator was appointed on DD MM 20XX, per a members' voluntary liquidation. Tax clearance was granted on DD MM 20XX. The ATO lodged a proof of debt in relation to pre-appointment liabilities. You declared and paid a dividend to unsecured creditors on DD MM 20XX. In MM 20XX, your liquidator commenced the preparation of your final distribution calculation to your members, with assistance from external qualified accountants. On DD MM 20XX, the final distribution calculation was finalised: • The distribution to members was calculated by, amongst other things, deducting your expected tax liability for the liquidation period, which included tax on the transfer of land. • For X members, the distribution was comprised entirely of cash. • For one member, Shareholder Pty Ltd (the shareholder), the distribution was comprised of cash, an in-specie assignment of a loan receivable, and the transfer of a parcel of land (land) (in-specie land distribution). • The distributions were each partially franked with franking credits to the same franking percentage, with franking credits totalling $X. The franking credits attached related to tax that was expected to be payable during the liquidation period, mainly relating to tax paid in the pre-appointment period as well as tax payable in relation to the transfer of the land. The final distribution is as follows: • Cash: $X • Loan receivable: $Y • Land: $Z Funds to pay your tax liability for the liquidation period were withheld from the final distribution and are held by the liquidator. On DD MM 20XX the cash distribution was paid, and the loan receivable was assigned. On this date, you issued final distribution statements to your members which identified you as the distributor; the date of distribution; and the amount of distribution and calculated franking credits attached. Your liquidator engaged the services of a law firm to act as the settlement agent for the in-specie land distribution. This law firm was responsible for preparing the transfer documents and for engaging XXXX and XXXX. Your liquidator was advised by the law firm regarding the process to effect the in-specie land distribution that on DD MM 20XY, your liquidator and the shareholder signed the first land transfer form. Between DD MM 20XY and DD MM 20XZ, the following occurred: • Documents were lodged with XXXX to be assessed before the land transfer could be lodged with XXXX. On this date, XXXX requested an updated valuation of the land. • The updated valuation was provided to XXXX. • XXXX requested further information. • The information request from XXXX was responded to. • XXXX assessed nominal duty on the land transfer. • The first land transfer form and supporting statutory declaration were lodged with XXXX. • XXXX identified issues with the transfer forms, which needed to be resigned and resubmitted. • Your liquidator and the shareholder signed a new, second land transfer form and submitted this to XXXX. • XXXX requested your liquidator to provide the original copy of the supporting statutory declaration, which was still held by XXXX from the duty assessment process. • Your liquidator requested the declaration from XXXX. • Your liquidator again requested the declaration from XXXX. • XXXX returned the declaration. • The declaration was provided to XXXX. • XXXX identified similar issues with the statutory declaration form, which needed correcting and resubmitting. • A new statutory declaration was signed. • The second land transfer form and new supporting statutory declaration was resubmitted with XXXX. • The land transfer was processed by XXXX. Following the land transfer process, your liquidator engaged an external accountant to prepare your outstanding tax returns for the liquidation period, being a part period ended 30 June 20XX, and the years ending 30 June 20XY and 30 June 20XZ. These tax returns are prepared but not lodged. Reasons for not lodging returns until the in-specie land distribution was completed, was due to uncertainty regarding: • Whether XXXX and/or XXXX would accept the land valuation • When the in-specie land distribution would be assessed by XXXX and XXXX • You being required to recognise a net capital gain of $X due to the in-specie land transfer. The accountant had prepared your draft tax returns on the basis that the capital gain arose in the year ended 30 June 20XX. • Upon preparation of the draft tax returns, the accountant raised issues around the franking account and whether franking deficit tax was payable in respect of the final distribution, because expected tax payable had not been credited to the franking account given that the outstanding returns had not been lodged and paid. Accordingly, there was uncertainty as to your franking account balance and whether the franking deficit tax offset could apply. Your franking account balance at DD MM 20XX was $X prior to making the final distribution and no further credits have been made to the franking account. You did not pay, or pre-pay, tax in respect of the in-specie land transfer and respective CGT event A1.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 202-60 | Income Tax Assessment Act 1997 section 202-80 | Income Tax Assessment Act 1997 section 205-30 | Income Tax Assessment Act 1997 section 205-40 | Income Tax Assessment Act 1997 section 205-45

Reasons for decision: Summary: Subsection 104-10(2) of the ITAA 1997 provides that you dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner. Subsection 104-10(3) of the ITAA 1997 provides that the time of the event is: (a) when you enter into the contract for the disposal; or (b) if there is no contract - when the change of ownership occurs. In your circumstances, there was no contract for the disposal of the land because it was transferred as a result of liquidation. Therefore, CGT event A1 occurred when beneficial ownership of the land changed from you to the recipient shareholder. The in-specie land distribution occurred on DD MM 20XX; however, the land title was not properly perfected and transferred until DD MM 20XZ due to the various administration issues noted. There are various factors that indicate that beneficial ownership of the property changed on DD MM 20XX: • You ceased reporting rental income and expenses, and the shareholder commenced reporting rental income and expenses • Other final distributions by you were made on this date • No consideration was given to you for the land Notwithstanding the difficulties in perfecting the land title and registering its transfer with the relevant state authorities, the land title isn't a contract for sale. Therefore, the time of transfer is when beneficial ownership changed and the distributions were made on DD MM 20XX. This is consistent with principles about when amounts are credited, as discussed in Taxation Ruling TR 2024/2 Income tax: when does a corporate limited partnership 'credit' an amount to a partner in that partnership? Item 1 of the table in subsection 205-30(1) of the ITAA 1997 provides that a franking debit arises in your franking account when you frank a distribution you make. The franking debit is equal to the amount of the franking credit of the distribution. The debit arises on the day on which the distribution is made. When making and franking a distribution, there are certain requirements you must meet to make a franked distribution, including making a valid distribution statement in respect of the distribution. Section 202-80 of the ITAA 1997 provides the required form and content of a franked distribution statement. A statement is not a valid distribution statement unless it contains the information required by subsection 202-80(3). Subsection 202-80(3) requires that the statement must: (a) identify the entity making the distribution; and (b) state the date on which the distribution is made; and (c) state the amount of the distribution; and (d) state that there is a franking credit of an amount specified on the distribution; and (e) state the franking percentage for the distribution; and (f) state the amount of any withholding tax that has been deducted from the distribution by the entity; and (g) include any other information required by the approved form that is relevant to imputation generally or the distribution. In your circumstances, the distribution statement you provided did not include all the information required by subsection 202-80(3), being the franking percentages of the distribution. Further, section 202-60 of the ITAA 1997 provides that the amount of franking credits attaching to a distribution is that amount stated in the distribution statement. Therefore, because the distribution statements did not disclose all required information, the distributions made in the year ended DD MM 20XX were not franked. No franking debit arose in your franking account in the year ended DD MM 20XX. For completeness, because no franking debit arose in your account in the year ended DD MM 20XX, your franking account did not go into deficit, as explained in subsection 205-40(2) of the ITAA 1997. Accordingly, you are not liable to franking deficit tax per subsection 205-45(2), and the franking deficit tax offset and related Commissioner's discretion under subsection 205-70(6) are not applicable.