CGT Rollover Relief On Transfer Of Company Assets

Q&A Tax

Question :

Mr & Mrs H are the sole shareholder a Directors of H Pty Ltd, and each holds 50% shares of the
company. They are both aged in their 75s. The company has a share portfolio and other assets.

In the FY2019, Mr & Mrs H decided to close the business, and all assets of the company were disposed.
The share portfolio was transferred into the joint personal names of Mr & Mrs H.

As there is no real change in the beneficial ownership of the share portfolio, can the company claim
roll-over relief from GGT as would have been the case.

 

Answer:

While there is a rollover for a transfer of assets of individuals, trustee and partners of partnership to
a wholly owned company (Subdivision 122-A and 122-B), there is no CGT rollover for the transfer of the
share portfolio from the company to the individuals even if the individuals are equal shareholders of
the company. This transfer would trigger CGT to the company.

Further, the transfer of assets out of the company to the shareholders would be an assessable
dividend to the extent of the value of the shares that exceeds the amount debited against the share
capital.
TR 2003/8 “Income tax: distributions of property by companies to shareholders – amount to be
included as an assessable dividend” provides further guidance on this issue. Paragraph 4 states:

‘The amount of a dividend in respect of a distribution of property (including shares held by the company
in another company) to a shareholder in their capacity as a shareholder will be the money value of the
property at the time it is distributed, reduced by the amount debited to a share capital account of the
distributing company in respect of the distribution.’

Mr & Mrs H should review the tax position for the company and themselves in relation to this
transaction.

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