Private ruling: CGT - transfer of share ownership
Date of advice: 21 August 2025
Published: 27 October 2025
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the severance of your joint ownership of Company A shares, resulting in each individual holding their portion of the shares individually and in their own name, constitute a capital gains tax (CGT) event under the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. CGT event A1 will happen when you each dispose of your 50% interest in those X number of shares. For each of you, there will be a change of ownership from a 50 % interest in each of those shares that are now owned 100 % by the other. At present (before the proposed transfer) you each own a 50 % interest in X number of Company A shares. You are currently both legal and beneficial owners of all the shares and there will be a change in legal and beneficial ownership when you effect the transfer. After the proposed transfer, you will each own 100 % interest in X number of those shares. This means you each ceased to own a 50 % interest in X number of shares that are now owned wholly by the other person. Each individual will hold X number of shares, with the acquisition cost of 50 % of those shares being the original purchase price and the remaining 50 % will be based on the market value on the day of transfer. The market value substitution rule will apply. This means the market value on the day of transfer is also the capital proceeds for the sale of your 50 % interest in those shares Based on your circumstances, there are no exemptions and or rollovers that may allow you to reduce, defer or disregard your capital gain or loss.

Relevant facts and circumstances: You are both are joint owners of X number of Company A shares held jointly in equal shares. You acquired the shares more than 12 months ago and they have been held continuously since acquisition. The shares are held on capital account and not as trading stock. You now wish to sever the joint ownership of the shares so that each of you individually holds X number of shares. You are looking to effect this transfer primarily for estate planning purposes. No consideration will be given by either of you when the transfer takes place.

Relevant legislative provisions: Income tax Assessment Act 1997 section 102-20 | Income tax Assessment Act 1997 section 104-10 | Income tax Assessment Act 1997 section 106-5 | Income tax Assessment Act 1997 section 116-20

Reasons for decision: Summary: CGT event A1 has happened to the 50% interest in XX shares for each of you. For each of you, there will be a change of ownership from a 50 % interest in each of those shares that are now owned 100 % by the other. The market value is also the capital proceeds for the sale of your 50 % interest in those shares. The market value substitution rule will apply. Based on your circumstances, there are no exemptions and or rollovers that may allow you to reduce, defer or disregard your capital gain or loss. B efore the proposed transfer you each owned a 50 % interest in XX shares. After the proposed transfer, you will each own 100 % interest in XX shares. This means you each ceased to own 50 % interest in each of the XX shares that are now owned wholly by the other person. | Detailed Reasoning - Detailed reasoning: Part 3-1 of the ITAA 1997 includes in assessable income any net capital gain made in relation to an income year. Division 104 sets out all of the CGT events for which a capital gain or capital loss can be made. Section 102-20 of the ITAA 1997 provides that a capital gain or capital loss results from a capital gains tax (CGT) event occurring. Section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) Disposal of a CGT asset: CGT event A1 explains a CGT event A1 only happens if you dispose of a CGT asset. 'Disposal' is defined for CGT purposes to mean only those situations where there is a change of ownership of the asset from you to another entity, whether because of some act or event or by operation of law. Disposal can refer to part of a larger asset such as an interest in it. A disposal includes effectively a part disposal because the definition of a CGT asset includes part of a CGT asset. For example, the transfer of registration of shares from the husband ' s name into the joint names of husband and wife triggered CGT event A1 (AAT Case Murphy v FCT [2014AATA461]. There is a very limited form of rollover or exemption relief from the Part 3-1 rules available for the gains that would otherwise arise upon transfers of assets between parties to a relationship. The limited extent to which capital gains made are disregarded and the limited roll-over relief available confirm that transfers of assets between spouses other than upon a breakdown in relationship are intended to be taxable events. That rollover relief is not available on the present facts. Individuals who own a CGT asset as joint tenants are treated as if they each owned a separate CGT asset constituted by an equal interest in the asset and as if each of them held that interest as a tenant in common. Under section 106-5 ITAA 1997 - Partnerships conveys any capital gain or capital loss from a CGT event happening in relation to a partnership or one of its CGT assets is made by the partners individually. | Detailed Reasoning - Market value substitution: Under subsection 116-20(1) of the ITAA 1997, your capital proceeds from a CGT event include the total of the money you have received, or are entitled to receive, in respect of a CGT event happening. Where on the disposal of an asset no money or property is received, the market value substitutionrule contained in section 116-30 of the ITAA 1997 generally applies, such that you are taken to have received the market value of your ownership interest in the property at the time the CGT event occurs. If you sell, transfer or gift property to family or friends for less than it is worth, you'll be treated as if you received the market value of the property for CGT purposes. You use the market value of a property to calculate your CGT if both of the following are true: • what you received was more or less than the market value of the property • you and the new owner were not dealing with each other at arm's length. This is called the 'market value substitutionrule. | Detailed Reasoning - Application to your circumstances: At present (before the proposed transfer) you each own a 50 % interest in X number of Company A shares. You are currently both legal and beneficial owners of all the shares and there will be a change in legal and beneficial ownership when you effect the transfer. After the proposed transfer, you will each own 100 % interest in X number of those shares. This means you each ceased to own 50 % interest in X number of shares that are now owned wholly by the other person. CGT event A1 will happen when you each dispose of your 50% interest in X number of shares. Each individual will hold X number of shares, with the acquisition cost of 50 % of those shares being the original purchase price and the remaining 50 % will be based on the market value on the day of transfer. The market value substitution rule will apply. This means the market value on the day of transfer is also the capital proceeds for the sale of your 50 % interest in those shares Based on your circumstances, there are no exemptions and or rollovers that may allow you to reduce, defer or disregard your capital gain or loss.