Private ruling: Capital gains tax
Date of advice: 18 March 2019
Published: May 2019
Ruling period: Financial year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Are you liable for capital gains tax (CGT) based on your legal ownership interest in the property? | A1: Yes

Relevant facts and circumstances: You owned a property jointly with your ex-spouse. Your legal ownership interest at the time of disposal of the property was 50%. You and your ex-spouse had a financial settlement which was formalised in consent orders issued by the Family Court, under the Family law Act 1975 . The orders state that the property will be sold and then instruct how the post-sale proceeds will be distributed.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 118-130 | Family Law Act 1975

Reasons for decision: Summary: You make a capital gain or capital loss when a capital gains tax (CGT) event happens to a CGT asset. The most common event, CGT event A1, occurs when you dispose of your ownership interest in the asset to another entity such as when you dispose of, or transfer, you ownership interest in land. Any capital gain or capital loss made upon the disposal of a property will be based upon legal ownership. The property was owned jointly with equal 50% shares between you and your ex-spouse. The capital gain will be based upon that legal ownership interest of 50%. This is in accordance with Taxation Ruling TR 93/32, where it is stated that income from property must be shared according to legal interest of the owners except in those very limited circumstances where there is sufficient evidence to establish that the equitable interest is different from the legal title. The legal ownership of the property is 50%-50% and the court has ordered that the distribution of the sale proceeds of the property be split differently. Court orders or consent orders made under the Family Law Act 1975 that stipulate a percentage amount each party is to receive from the disposal of assets do not affect how the CGT legislation is applied to properties acquired/owned jointly. Any CGT liability is required to be paid based on ownership interest in the property as per the legal title and not the proceed distribution as per the court order.