Private ruling: CGT - transfer of strata units
Date of advice: 18 February 2026
Published: 7 April 2026
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Will section 118-42 of the ITAA 1997 apply to disregard any capital gain made on the transfer of your ownership interest of property now known as unit 2 & 3 to the other co-owners? | A1: Yes Section 118-42 of the ITAA applies to disregard a capital gain or loss if you own land on which there is a building, and you subdivide the building into stratum units and transfer each unit to the entity who had the right to occupy it just before the subdivision. In your circumstances you and your siblings purchased a block of land, many years later prior to the construction of the villa's you all entered into a written agreement that each villa built would be for the sole private use of each couple giving then a right to occupy. This agreement also advised that you would eventually subdivide the land when finances allowed. In late 20YY each villa was transferred to the couple who under the agreement had the right to occupy. You applied in MM 20YY to have a strata subdivision of the buildings on X Street, which you and your sibling owned as tenants in common, this application was approved on DD MM 20YY. You transferred your ownership in villa 2 & 3 to your siblings prior to this date, therefore section 118-42 of the ITAA 1997 applies to disregard any capital gain or loss related to this transfer. The CGT A1 event will occur when you sell your strata unit

Relevant facts and circumstances: You, your siblings and spouses: • You and Person B • Person C and Person D • Person E and person F purchased a vacant land at as tenants in common in equal shares x% ownership interest Each couple then registered their ownership interest as joint tenants The cost to purchase the land was x amount You all applied for a home loan to fund the purchase of the land and were approved for x amount Then each couple contributed x amount to make up the left over amount owning No written agreement was entered into at the time of purchasing the land On DD MM 19YY before the construction of the villas a written agreement was provided which detailed subdivision plans and rights to occupy amongst parties. The villas where personally used by each couple as holiday homes and where never used as your main residence The villas where never used to earn assessable income Sometime in 20YY you all decided to subdivide the property into 3 individual blocks Prior to the subdivision each villa was transferred to the co-owner who had the right to occupy In or around DD MM 20YY the land was subdivided into 3 new assets under three stratum units Each Stratum Villa and the parcel of land the then belonged to: • Unit 1 You and person B at x% • Unit 2 Person C at x% • Unit 3 Person E and person F at x%

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-42