Private ruling: capital gains tax
Published: June 2012
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013
Date scheme commenced: 1 July 2011

Ruling: Q1: Will transferring assets from existing accounts held in your name to the new trust accounts trigger a capital gains tax (CGT) event? | A1: No.

Relevant facts and circumstances: A trust was established. You are the trustee of the trust. At the time of transferring assets to the trust, a tax file number (TFN) had been applied for but had not been allocated. Trading and bank accounts were set up using your TFN. The financial institutions have advised that they cannot change details attached to an existing account. Their advice is to open new accounts using the trust's TFN, and then transfer the assets over which are held in the existing accounts. You have received various letters from the Australian Taxation Office advising of discrepancies detected by the information matching system. These have been resolved after you have provided information to show that the income in dispute is trust income.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20.

Reasons for decision: Summary: Section 102-20 of the Income Tax Assessment Act 1997 provides that you can make a capital gain or loss if and only if a CGT event occurs. The most common CGT event, CGT event A1, occurs when you dispose of a CGT asset to someone else, for example, if you sell a property. When considering the disposal of a property, the most important element in the application of the CGT provisions is ownership. It must be determined who is the beneficial owner of the asset. A beneficial owner is defined in Taxation Ruling IT 2486 and Taxation Determination TD 92/106 as a person or entity who is beneficially entitled to the income and proceeds from the asset. In your case, the accounts were set up in your name as the trust had not been allocated a TFN. The assets held in the existing accounts are property of the trust. Even though the accounts were held in your name, the income from the accounts was distributed to beneficiaries by the trust. Therefore, the beneficial ownership of these accounts belongs to the trust. There will be no CGT event as a result of the transfer of assets to the new accounts, as the transfer does not constitute a change of ownership. Accordingly, no capital gain or loss will arise as a result of the transfer.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.