Private ruling: Pre-CGT - status
Date of advice: 14 May 2025
Published: 21 July 2025
Ruling period: Income year ended 30 June 20XX
Date scheme commenced: XX/XX/XXX

Ruling: Q1: Have the interests held in the properties by held by the Joint Association stopped being pre-CGT assets due to there having been a disposal on or after 20 September 1985? | A1: Yes. | Q2: Have the interests held in the properties by the Joint Association stopped being pre-CGT assets due to the application of the former section 160ZZS of the Income Tax Assessment Act 1936 (ITAA 1936) or Division 149 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A2: No, due to the answer to question 1. | Q3: Will any capital gains made by the Joint Association from the Proposed Transaction be disregarded pursuant to paragraph 104-10(5)(a) of the ITAA 1997? | A3: No.

Relevant facts and circumstances: 1. Two unincorporated associations, Association 1 and Association 2, were established to provide social and cultural support for immigrants to Australia in XX/XX/XXXX. They were sister associations from the same country. 2. Both sister associations formed another unincorporated association, named Joint Association in XX/XX/XXXX. This association has a committee made up of members from both sister associations and was formed as a body to represent the common interests of both Association 1 and Association 2. 3. On XX/XX/XXXX, the Joint Association agreed to buy vacant land in State A, upon which 2 buildings were built for the use of both sister associations. The buildings were on 2 separate addresses. 4. Both sister associations still share the buildings and facilities built on both properties for social and cultural activities for members of both associations. 5. The Certificates of Titles for both properties before show that initially there was 4 individuals that held the properties as joint tenants and as trustees for the unincorporated Joint Association. 6. In the mid-1990s, all 3 of the unincorporated associations incorporated under the Associations Incorporation Act 1984 (NSW) . Notwithstanding the incorporation of each of the associations, there were no changes in the purposes and membership of any of the associations. 7. Pursuant to the Associations Incorporation Act 1984 (NSW ) any assets held on behalf of the former unincorporated association to the incorporated association is vested with the incorporated association. 8. Replacement Certificate of Titles issued for both properties to the incorporated Joint Association as the owner of both properties. 9. No substantial renovations or improvements have been made to the property. Proposed transaction 10. As both sister associations wish to go their separate ways, it is proposed that one of the properties will be transferred to the one of the incorporated sister associations and the other property will be transferred to the other incorporated sister association. 11. The transfer of the Certificates of Titles will occur at market value and is expected to be subject to stamp duty. Where the market values for each property is not equal, cash and / or other adjustments may be required as part of the consideration to ensure both incorporated sister associations receive property of the same value from the incorporated Joint Association.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 40 | Income Tax Assessment Act 1936 section 160ZZS | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 paragraph 104-10(5)(a) | Income Tax Assessment Act 1997 section 149 | Associations Incorporation Act 1984 (NSW) section 10 | Associations Incorporation Act 1984 (NSW) section 48 | Associations Incorporation Act 1984 (NSW) subsection 49(2) | Associations Incorporation Act 1984 (NSW) Schedule 2 section 2(1) Question 1 | Have the interests held in the properties by held by the Joint Association stopped being pre-CGT assets due to there having been a disposal on or after 20 September 1985?

Reasons for decision: Summary: No, becausethe interest in the properties stopped being pre-CGT assets when CGT event A1 happened. | Detailed Reasoning - Detailed reasoning: 15. The interest in the properties stopped being pre-CGT asset when unincorporated joint association incorporated under the NSW Act, for the reasons provided in question 1. Hence the properties did not stop being pre-CGT assets because of the operation of either provision. | Detailed Reasoning - Question 3: Will any capital gains made by the Joint Association from the Proposed Transaction be disregarded pursuant to paragraph 104-10(5)(a) of the ITAA 1997? | Summary: No, because the properties are not taken to have been acquired by the incorporated Joint Association on or before 19 September 1985. | Detailed Reasoning - Detailed reasoning: 16. Paragraph 104-10(5)(a) of the ITAA 1997 only disregards a capital gain if you acquire the asset before 20 September 1985. As the incorporated Joint Association is taken to have acquired the properties after this date, this provision does not apply. [1] The NSW Act 1984 is the predecessor of Associations Incorporation Act 2009 (NSW) . [2] Associations Incorporation Act (NSW) 1984 , s 48

Reasons for decision: 1. CGT event A1 in section 104-10 occurs when there is a change in ownership of a CGT asset. CGT event A1 does not occur if there is only a change of legal ownership and not a change of beneficial ownership. | 2. A CGT asset that an entity owns is a pre-CGT asset if it was last acquired before 20 September 1985, and no income tax provision has operated to treat it as having been acquired after that date. | 3. The unincorporated Joint Association purchased land to DD MM 19YY on which they built 2 buildings that had different addresses. The use of both properties was shared by both of the unincorporated sister associations. | 4. At all times just prior to the incorporation of Joint Association, the individuals listed on the Certificates of Titles for both properties were acting as trustees and holding the properties on behalf of the members of the unincorporated Joint Association. | 5. The unincorporated Joint Association incorporated on XX/XX/XXXX under Associations Incorporation Act 1984 (NSW) (NSW Act). [1] | 6. In ATO Interpretive Decision ATO ID 2002/808 Income Tax Capital gains tax: conversion from unincorporated association to incorporated association under Associations Incorporation Act 1981 (Qld) (ATO ID 2002/808), the Commissioner considered if there is a change of ownership of the asset upon an unincorporated association converting into an incorporated association under the Associations Incorporation Act 1981 (Qld) (QLD Act))). | 7. ATO ID 2002/808 concludes that an unincorporated association and the later incorporated association are not the same company. | 8. Upon incorporation under both the QLD Act and the NSW Act the incorporated association: | (a) acquires the property, rights and liabilities of the former association, and | (b) is a separate legal entity from the former association. | 9. The provisions of the NSW Act are consistent with the provisions in the QLD Act as outlined in ATO ID 2002/808, except for an association seeking incorporation under the NSW Act where the association is a company limited by guarantee within the meaning of the C ompanies (New South Wales) Code or a society registered under the Co-operation Act 1923 (not being a society the capital of which is divided into shares or stock). [2] | 10. Where company limited by guarantee within the meaning of the C ompanies (New South Wales) Code or a society registered under the Co-operation Act 1923 (not being a society the capital of which is divided into shares or stock) association incorporates pursuant to section 48 of the NSW Act, subsection 49(2) provides the incorporation of the company or society as an incorporated association does not affect the identity of the company or society, which shall be deemed to the same body before and after the incorporation. | 11. As all the associations in question, went from being unincorporated associations to incorporated associations pursuant to section 10 of the NSW Act, subsection 49(2) of the NSW Act does not apply. | 12. Consequently, each of the unincorporated associations is not the same entity or deemed to be the same entity or body before and after incorporation as its incorporated successor association and therefore there is a change in ownership of the assets upon incorporation. | 13. Accordingly, CGT event A1 (section 104-10) will happen to the assets of the unincorporated association on the conversion to an incorporated association. | 14. Therefore, CGT event A1 happens to each of the properties transferred to the Joint Association on incorporation under the NSW Act. This is because this association is taken to acquire the properties on incorporation which occurred after 19 September 1985. As a consequence, the properties are not pre-CGT assets. | Question 2: Have the interests held in the properties by the Joint Association stopped being pre-CGT assets due to the application of the former section 160ZZS of the ITAA 1936 or Division 149 of the ITAA 1997?