Private ruling: CGT - disposal
Published: February 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Will capital gains tax (CGT) event A1 be triggered for a co-owner who retains beneficial ownership in an asset when a third party purchases the other co-owner's interest in that asset? | A1: No

Relevant facts and circumstances: You jointly owned a number of properties with another party. All the properties were purchased after 20 September 1985 and are used as investment properties. In late 2013, a third party purchased your co-owner's interest in the properties. The third party replaced your co-owner on the title deeds. You retained your interest in the properties and remained as a co-owner of the properties on the title deeds.

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

Reasons for decision: Summary: Capital gains tax (CGT) event A1 occurs when you dispose of a CGT asset. You are considered to have disposed of a CGT asset if a change of ownership occurs from you to another entity because of some act or event or by operation of law. The capital gain or capital loss is made at the time of the event (section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997)). A beneficial owner is defined in Taxation Ruling IT 2486 and Taxation Determination TD 92/106. A beneficial owner is the person or entity who is beneficially entitled to the income and proceeds from the asset. A legal owner is the individual who has their name on the legal documents associated with the CGT asset, an example would be the title deed for a property. An individual can be a legal owner but have no beneficial ownership in an asset. It is the beneficial owner of a CGT asset that is liable for capital gains tax upon sale of the assets. In your case, you have maintained your beneficial ownership of the properties throughout the changes in co-ownership. As there has been no change in beneficial ownership relating to your interest in the property, CGT event A1 has not triggered relating to your interest in the properties.