Private ruling: CGT- in specie share transfer
Date of advice: 19 May 2022
Published: August 2022
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the proposed restructure described in the relevant facts and circumstances result in a CGT event happening? | A1: No.

Relevant facts and circumstances: An overseas entity (Overseas 1) owns shares in two Australia companies. Overseas 1 is wholly owned by another overseas entity (Overseas 2). Overseas 2 is owned by a number of Australian trusts (together referred to as the Australian Trusts). The Australian Trusts will form a partnership (the Partnership). Each of the Australian Trusts will have an interest in the Partnership proportional to the interest they currently have due to the operation of the Income Tax Assessment Act 1997 (ITAA 1997). Overseas 1 will make an in specie distribution of the shares it holds in the two Australian companies to the Partnership. The shares in the Australian companies will be registered with ASIC in the name of the Partnership, with the partners noted to be joint owners. The ownership interest that the Australian Trusts will have in each share of the two Australian companies will be proportional to their interest in the Partnership.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10

Reasons for decision: Summary: Section 104-10 of the ITAA 1997 provides: (1) CGT event A1 happens if you * dispose of a * CGT asset. (2) 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. In Taxation, Commissioner of (Cth) v Everett [1980] HCA 6 Barwick CJ, Stephen, Mason and Wilson JJ provided: "Although a partner has no title to specific property owned by the partnership, he has a beneficial interest in the partnership assets, indeed in each and every asset of the partnership." The result of the in specie transfer is that the Australian Trusts will have the same beneficial interest they did before the transfer. Therefore, the in specie transfer does not result in beneficial ownership changing. As a result, no CGT event will occur.