Private ruling: Capital gains tax
Published: May 2012
Ruling period: Year ending 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Questions and answers | Are you required to pay capital gains tax on a property purchased prior to 20 September 1985? | No. | Is there a capital gains tax event when the title registration is altered from joint tenants to tenants in common? | No.

Relevant facts and circumstances: You and your spouse purchased a building prior to 1985. This property was held in joint tenants. You and your spouse severed your joint tenancy and from that point held the property as tenants in common.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10. | Income Tax Assessment Act 1997 Section 108-5. | Income tax Assessment Act 1997 Section 108-7.

Reasons for decision: Summary: You only make a capital gain or capital loss if a capital gains tax (CGT) event happens to a CGT asset. Land and buildings are specifically listed under section 108-5 of the ITAA 1997 as CGT assets. A capital gain or capital loss you make on the disposal of an asset is disregarded if you acquired the asset before 20 September 1985 (pre CGT). In your case your property was purchased prior to the implementation of the Capital gains legislation. Therefore, capital gains tax will not apply to the disposal of your pre CGT property. Severing joint tenants Section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a capital gains tax (CGT) event occurs when a CGT asset is disposed of. The disposal of an asset eventuates when a change of ownership takes place either because of some act/event or by operation of law. By virtue of section 108-7 of the ITAA 1997, the CGT provisions apply as if by you owning the property as joint tenants, you would own the property as tenants in common in equal shares. Accordingly, the Commissioner takes the view that no CGT implications will arise when you (as joint tenants) convert your joint tenancy to a tenancy in common in equal shares (Taxation Determination TD 13). After your change in ownership from joint tenancy to tenants in common, as you and your spouse each have a fifty percent interest in the properties, there was no change in your beneficial ownership. As such, there was no CGT event and no capital gain or loss was made when you severed your joint tenancy and became tenants in common. There will be no CGT liability on the disposal of your property.

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