Private ruling: CGT - severance of joint ownership
Date of advice: 5 February 2026
Published: 30 March 2026
Ruling period: Year ending 1 July 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the severance of the joint ownership of your investment portfolio, resulting in your spouse having 100% ownership of the portfolio individually and in their own name only constitute a capital gains tax (CGT) event for you under the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. As an Australian tax resident, CGT event A1 will happen when you dispose of your 50% ownership interest in the investment portfolio. After the proposed transfer, you will have a 0% ownership interest in the portfolio. The market value substitution rule will apply. This means the market value on the day of transfer is also the capital proceeds you are deemed to have received for the disposal of your 50% interest in those shares. Based on your circumstances, there are no exemptions or rollovers that may allow you to reduce, defer or disregard your capital gain or loss

Relevant facts and circumstances: You and your spouse are tax residents of Australia. You are a citizen of Country B. Your spouse is a citizen of Country A. You and your spouse have lived in Australia since MM 19XX. You and your spouse are permanent residents of Australia. You and your spouse are joint owners of an overseas based investment portfolio (all shares in listed equities). The investment portfolio was originally held in your spouse's name only but has been held jointly by you both since 19XX when your name was added to the investment portfolio. Since that time, you and your spouse have divided all income from the share portfolio equally when lodging your individual tax returns in Australia. You now wish to sever the joint ownership of the shares. After the proposed transfer, the investment portfolio will be held solely in your spouse's name. You are looking to undertake this transfer primarily for estate planning purposes. No consideration will be given by either of you when the transfer takes place.

Relevant legislative provisions: Income tax Assessment Act 1997 section 102-20 | Income tax Assessment Act 1997 section 104-10 | Income tax Assessment Act 1997 section 108-7 | Income tax Assessment Act 1997 section 116-20 | Income tax Assessment Act 1997 section 116-30

Reasons for decision: Detailed Reasoning - Sale of foreign shares: Australian residents are subject to tax in Australia on their worldwide capital gains including from the sale of foreign shares. Australia's capital gains provisions are modified when foreign residents move to Australia and become Australian residents. They acknowledge the tax-free capital gain or loss for the period as a foreign resident by treating the person as if they had acquired their foreign assets at their market value on the day they became an Australian resident (in Australian dollars using the exchange rate as at that date). There is also a general exemption from the capital gains provisions for assets that you acquired before 20 September 1985. If you stop being an Australian resident for tax purposes, you are taken to have disposed of CGT assets for their market value at the time you stopped being a resident, except for any taxable Australian property. This is sometimes called 'deemed disposal'. Foreign and temporary residents are subject to CGT only on taxable Australian property. This is the reason you are not taken to have disposed of these particular CGT assets when you stop being an Australian resident for tax purposes. If you have assets that are not taxable Australian property that you are taken to dispose of when you stop being an Australian resident, you can claim the full 50% CGT discount if you have always been an Australian resident while owning the asset. If you have any indirect Australian real property interests, or options or rights to acquire such interests, you are taken to have immediately re-acquired these assets for their market value. | Detailed Reasoning - Joint tenancy to individual ownership: Part 3-1 of the ITAA 1997 includes in assessable income any net capital gain made in relation to an income year. Division 104 of the ITAA 1997 sets out all of the CGT events for which a capital gain or capital loss can be made. Section 102-20 of the ITAA 1997 provides that a capital gain or capital loss results from a CGT event occurring. Section 104-10 of the ITAA 1997 Disposal of a CGT asset: CGT event A1 explains a CGT event A1 only happens if you dispose of a CGT asset. 'Disposal' is defined for CGT purposes to mean only those situations where there is a change of ownership of the asset from you to another entity, whether because of some act or event or by operation of law . Disposal can refer to part of a larger asset such as an interest in it. A disposal includes effectively a part disposal because the definition of a CGT asset includes part of a CGT asset. For example, the transfer of registration of shares from the husband's name into the joint names of husband and wife triggered CGT event A1 (AAT Case Murphy v. FCT [2014] AATA 461). There is a very limited form of rollover or exemption relief from the Part 3-1 rules available for the gains that would otherwise arise upon transfers of assets between parties to a spousal relationship. The limited extent to which capital gains made are disregarded and the limited roll-over relief available confirm that transfers of assets between spouses other than upon a breakdown in relationship are intended to be taxable events. That rollover relief is not available on the present facts. Individuals who own a CGT asset as joint tenants are treated as if they each owned a separate CGT asset constituted by an equal interest in the asset and as if each of them held that interest as a tenant in common (section 108-7 of the ITAA 1997). | Detailed Reasoning - Types of capital proceeds: Capital proceeds are what you receive, or are entitled to receive, from a CGT event, such as selling an asset. For most CGT events your capital proceeds will be money. They can also be the value of any property you receive or are entitled to receive. If you receive: • foreign currency - work out the capital proceeds by converting it to Australian currency at the time of the CGT event • property (including shares) - your capital proceeds include the market value of the property at the time of the CGT event. If you give away or sell an asset for less than it's worth, your capital proceeds equal the market value of the asset. | Detailed Reasoning - Market value substitution rule.: Under subsection 116-20(1) of the ITAA 1997, your capital proceeds from a CGT event include the total of the money you have received, or are entitled to receive, in respect of a CGT event happening. Where on the disposal of an asset no money or property is received, the market value substitutionrule contained in section 116-30 of the ITAA 1997 generally applies, such that you are taken to have received the market value of your ownership interest in the property at the time the CGT event occurs. If you sell, transfer or gift property to family or friends for less than it is worth, you'll be treated as if you received the market value of the property for CGT purposes. You use the market value of a property to calculate your CGT if both of the following are true: • what you received was more or less than the market value of the property • you and the new owner were not dealing with each other at arm's length. This is called the market value substitutionrule. | Detailed Reasoning - Application to your circumstances: As an Australian tax resident, CGT event A1 will happen when you dispose of your 50% ownership interest in the investment portfolio. At present, you and your spouse are jointly the legal and beneficial owners of all the shares in the portfolio and there will be a change in the legal and beneficial ownership after the transfer. After the proposed transfer you will own 0% of those shares. This means you will cease to own a 50% interest in all the shares that are now owned wholly by your spouse. The market value substitution rule will apply. This means the market value on the day of transfer is also the capital proceeds for the disposal of your 50% interest in those shares. Based on your circumstances, there are no exemptions or rollovers that may allow you to reduce, defer or disregard your capital gain or loss.