Private ruling: Capital gains tax
Date of advice: 22 April 2024
Published: 3 June 2024
Ruling period: Year ending 30 June 20XX
Date scheme commenced: X XX 20XX

Ruling: Q1: Will there be a CGT event in relation to the 50% interest in the XX shares that you continue to own after the transfer into joint holding? | A1: No. | Q2: Will there be a CGT event in relation to the 50% interest in the XX shares that your spouse owns after the transfer into joint holdings? | A2: Yes.

Relevant facts and circumstances: You purchased XX XX shares between XX 20XX to XX 20XX. The cost base of your XX shares is $XX You transferred the above shares into your joint holding with your spouse on X XX 20XX. The transfer was done by your stockbroker. The transfer was at $XX per share (closing value) being $XX. Relevant legislative provisions Income tax Assessment Act 1997 section 104-10 Income tax Assessment Act 1997 section 106-5 Income tax Assessment Act 1997 section 108-7 IssueCapital Gains Tax Question 1 Summary There has not been a CGT event happen in relation to the 50% interest in the XX shares that you continue to own after the transfer into joint holding. Detailed reasoning Section 104-10 of the Income Tax Assessment Act 1997 (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. Disposal can refer to part of a larger asset such as an interest in it. Sections 108-7 ITAA 1997 - Interest in CGT assets as joint tenants 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. Under section 106-5 ITAA 1997 - Partnerships conveys any capital gain or capital loss from a CGT event happening in relation to a partnership or one of its CGT assets is made by the partners individually. The change of ownership has happened to 50% of your interest. The Australia Taxation Office looks beyond the mere issue of a new statement of ownership or certificate of title when searching for a change of ownership. Application to your circumstances Before the transfer, you owned 100% of the XX XX shares. After the transfer, you continue to own a 50% interest in each of the XX XX shares. Therefore, to the 50% shares you keep a CGT event A1 did not happen. You can only make a capital gain or loss if a CGT event happens. There has been no change of ownership as required by ITAA 1997 subsection 104-10(2) from you to another entity in respect to the 50% interest that you continue to own. From your perspective, the 50% interest in the XX XX shares continues to have the same acquisition dates that they originally had. The cost base will be 50% of the original cost base. Question 2 Summary A CGT event has occurred in relation to the 50% interest in the XX shares that your spouse owns after the transfer into joint holdings? Detailed reasoning Section 104-10 of the Income Tax Assessment Act 1997 (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. Disposal can refer to part of a larger asset such as an interest in it. Application to your circumstances Before the transfer, you owned 100% of these XX XX shares. After the transfer, you ceased to own 50% interest in each of these XX XX shares that is now owned by your spouse. There is a change of ownership to the 50% interests in each of those shares that are now owned by your spouse and therefore CGT event A1 has happened to these 50% interests in them. There will be two different cost bases. You will keep your original cost base for the 50% of the XX shares you retained and for the 50% interest in the XX shares that were transferred in the joint holding, Your spouse receives a new cost base linked to the market value as at the transfer date. This market value is also the capital proceeds for the sale of your 50% interest in those shares.