Changing ownership structure

Our Experts Answer:

As with many questions in tax, what appears to be a simple question on the face of it does not necessarily have a simple answer. Instinct suggests that the simple transformation of ownership from joint ownership into tenants in common ownership should not trigger any consequences under the bright-line rule.

We can be reasonably confident that there is no disposal, but where matters are not necessarily so clear is whether there is a restart of the bright-line clock. If the property were under a formal partnership, there is potential for there to be a deemed dissolution and disposal for bright-line purposes, but joint ownership generally between spouses is not regarded as a partnership.

The catch here is that the bright-line rule starts from the date that the instrument to transfer the land to the person is registered under the Land Transfer Act. This could mean that the bright-line clock is reset for a fresh five-year period. Philosophically I have trouble with this conclusion because I think that the right answer is that there is no disposal under the bright-line rule and no acquisition and restart of the bright-line clock, but the legislation does not clearly cater for this situation. You should consider getting professional advice to support your position if you are concerned.