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Question: Capital Gains Tax & Shares

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pretty0408

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Hi

I have an ususual situation (probably) and am seeking a solution.

I have shares registered in a company name. However I have different account designations to identify which shares belong to which beneficiary. Now if I want to transfer shares from one account designation to another e.g. AP to PP, JUST THE ACCOUNT DESIGNATION in the registeries I just need to fill in the Off Market Transfer forms.

The transfer happens at last sale price of a specific date.

Now the question is about the tax. Will capital gains tax arise as at that date OR will it arise when the shares are finally sold? If yes (or no), is there any ruling or tax law to support?
 
Re: Question: Capital Gain Tax & Shares

Is this a trust question? An account designation is usually something like "John Smith - Grocery Account" where "Grocery Account" is the designation.

If you're shifting trustees no tax. If you're moving assets between trusts then tax.
 
Re: Question: Capital Gain Tax & Shares

McLovin said:
Is this a trust question? An account designation is usually something like "John Smith - Grocery Account" where "Grocery Account" is the designation.

If you're shifting trustees no tax. If you're moving assets between trusts then tax.
Click to expand...

If the trust remains the same, I can't figure out why you would shift between Trustees only.
But if the new designation is a different trust, then the transaction would be treated like a sale by the old and purchase by the new benefiting entity.
 
Re: Question: Capital Gain Tax & Shares

That's the sort of thing I'd run past my accountant. Is this a SMSF? Are any of the accounts in pension mode? You can't just move money between the accounts of different people in a SMSF. Massive tax penalties can apply. If this is just a family trust then the money belongs to the trust. Moving money between accounts in the trust is not a CGT event IMHO.
 
Re: Question: Capital Gain Tax & Shares

pixel said:
If the trust remains the same, I can't figure out why you would shift between Trustees only.
But if the new designation is a different trust, then the transaction would be treated like a sale by the old and purchase by the new benefiting entity.
Click to expand...

It's very strange because like I said, an account designation is usually done to make multiple accounts easy to seperate. I've never heard of owning shares through a company and using the account designation field to define who the "beneficiary" is. If that's all it is, then I can't see how you would be taxed because account designation is an administrative tool for people or companies with multiple accounts it has no legal weighting. The shares would still belong to the company not to the name in the designation field and will be taxed as company property.
 
Re: Question: Capital Gain Tax & Shares


Yes it is an SMSF. 4 members. 2 youngsters in accumulation phase and 2 elders in pension phase. Youngsters want to sell a parcel of shares as they want to invest elsewhere. 2 Elders willing to buy shares. We are doing transactions at Market Price. The shares held in SMSF name with account designation to segregate them properly. The only benefit is both parties avoiding transaction costs. As long as we have proper documents and dealing at market price tax office cannot penalise us.
My question was regarding tax event. When should the youngsters recognize this as a CGT event as the ownership stays of the SMSF.
 
Re: Question: Capital Gain Tax & Shares


It's an interesting one. We pool the funds in our SMSF so this wouldn't come up for us. I would speak to my accountant about it, but thinking out aloud; the fund is the taxable entity so there really isn't a CGT event in that you are just reallocating assets between the members accounts, moving shares and compensating with cash. I remember hearing that this is one of the benefits of a SMSF versus say an industry fund. When you are in an industry fund and change over from accumulation to pension you generally pay CGT whereas you don't inside a SMSF.

Interestingly I just found this about a planned ban on off market transfers for SMSF:
http://www.superguide.com.au/smsfs/smsf-off-market-share-transfers-may-be-banned-from-july-2013
 
Re: Question: Capital Gain Tax & Shares


I know about this ruling, but as said it is not yet a law and as it is I am not trying to avoid paying tax. I am trying to get the timing right. We youngsters have carried forward losses so I will simply offset them if transfer date is the timing of CGT event. The benefit of an SMSF of avoding tax only comes when beneficiaries are same. So when we 2 youngsters reach our preservation age and then move the shares into pension phase, we don't pay tax. And I am sure this benefit will soon be removed by ATO by some or the other means.
 
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