Private ruling: Capital gains tax (CGT) - acquisition of a CGT asset
Published: December 2013
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2013

Ruling: Q1: Do you make a capital gain on the subdivision and subsequent transfer of a block of land into your name? | A1: No.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Person A and person B's parents owned a property. Prior to 20 September 1985, the property was gifted to person A and person B, along with person B's then spouse. Person B's spouse subsequently left and their name was removed from the title two years later. Three years later person A and person B decided to transfer the property to a private company (the property), in order to allow a specified number of additional families to legally build homes on the property. The company consists of a specific number of shares, each owned by one or more members of each family, a share per family. The property is used by a group of families for residential purposes. Each family (shareholder) have each individually paid for construction of their own residences. All dwellings were constructed on the land prior to 20 September 1985. Under this arrangement, a share is owned by person A and a share by person B. A number of additional shares were sold for $X. You own a share. After 20 September 1985, you and your spouse divorced and your spouse disposed of their share to you for an amount of $X. One share has changed hands numerous times, most recently to person C and person B after 20 September 1985, for $X. Since the time the company was originally formed, zoning rules have undergone substantial changes. The company have approached the council and have been advised that it is now possible to subdivide the property. The company will subdivide the property and pay all costs associated with the subdivision. The company will transfer ownership of the subdivided block to the existing shareholders. As a result of the subdivision you will own your dwelling and approximately a specified percentage of the property which includes the land on which your dwelling stands on. The company will be wound up with any remaining liabilities transferred equally to the shareholders.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20. | Income Tax Assessment Act 1997 Section 104-10.

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. You make a capital gain or capital loss if a CGT event happens to a CGT asset you own, such as land. The most common CGT event (CGT event A1) happens if you dispose of an asset to someone else. You dispose of an asset when a change of ownership occurs from you to another entity. The time of the event is when you enter into the contract for the disposal or if there is no contract when the change of ownership occurs. In your case, you and your spouse do not own the dwelling and land you are currently residing in. The company will be responsible for any CGT consequences, as the owner of the property when they transfer your share of the property to you. Therefore, there are no CGT consequences for you when your share of the property is transferred to you.