Private ruling: Capital gains tax - Joint tenancy - Disposal
Published: May 2012
Ruling period: Year ending 2013 | Year ending 2014 | Year ending 2015 | Year ending 2016
Date scheme commenced: Prior to 20 September 1985.

Ruling: Q1: Will you retain the capital gains tax (CGT) exemption on your original interest in the block of land? | A1: Yes.

Relevant facts and circumstances: Prior to 20 September 1985 you and your spouse purchased a block of land as joint tenants. After 20 September 1985 you and your spouse decided to include your child on the title as a joint tenant. No money exchanged hands and the title is now under three names as joint tenants. Your child paid the required stamp duty. The block has never been used for any commercial purpose and has been vacant since it was purchased and there is no partnership in relation to the block of land. The block of land is to be sold.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20 | Income Tax Assessment Act 1997 Subsection 104-10(3) | Income Tax Assessment Act 1997 Section 108-5 | Income Tax Assessment Act 1997 Section 108-7

Reasons for decision: Summary: You can make a capital gain or loss if and only if a CGT event happens to a CGT asset. Land is a CGT asset. Individuals who own a CGT asset as joint tenants are treated as if they each owned a separate CGT asset. CGT event A1 occurs when you dispose of an asset to someone else. | Detailed Reasoning - The time of the event is:: (a) when you enter into the contract for the disposal: or (b) if there is no contract when the change of ownership occurs However, any capital gain or capital loss on an asset you acquired before 20 September 1985 is disregarded. Accordingly, a capital gain made on the interest in the land you acquired prior to 20 September 1985 is disregarded. When you and your spouse included your child's name on the title, your child was given a one-third interest in the block of land and you and your spouse retained the other two-third interest in the block of land. As the two-third interest you and your spouse acquired was prior to 20 September 1985, it is exempt from capital gains tax. | Detailed Reasoning - Taxation Ruling IT 2540: IT 2540 relates to the disposal of partnership assets. As the ownership structure of the block of land is a joint tenancy IT 2540 does not apply to this case.

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