Capital gains tax - time of disposal where there is a dissolution of a club and acquisition of that club's assets by another club from the liquidator

What is the time of disposal of a CGT asset under CGT event A1 pursuant to section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) where Club A is to be dissolved and its assets are to be transferred by the liquidator to Club B?

The time of disposal for CGT under section 104-10 of the ITAA 1997 is when the liquidator executes an instrument of transfer in respect of the club A's CGT asset to Club B.

Club A and Club B are companies limited by guarantee.

Both clubs are registered under the Registered Clubs Act 1976 (NSW).

Club A is to amalgamate with Club B pursuant to subsection 17A(1) of the Registered Clubs Act 1976 (NSW) which states, at paragraph (b), that a reference to the amalgamation of 2 or more registered clubs is a reference to an amalgamation affected by the continuation of one of those clubs and the dissolution of the other club or clubs.

There is a Memorandum of Understanding (MOU) reflecting a view to amalgamate the clubs pursuant to the provisions of the Registered Clubs Act 1976 (NSW).

The members of both clubs voted at general meeting to amalgamate.

Club A was placed in voluntary liquidation and the liquidator will transfer the club's assets to Club B.

For the purposes of subsection 104-10(3) of ITAA 1997, CGT event A1 happens at the time the liquidator of the club disposes of club A's CGT asset. Subsection 104-10(2) of the ITAA 1997 provides that disposal occurs when there is a change of ownership. The change of ownership will occur when the liquidator of Club A executes an instrument of transfer to Club B in respect of a CGT asset of Club A. This results in a transfer of both legal and beneficial interest in that asset to Club B.

The only document that refers to the acquisition of assets by Club B is the MOU. This agreement merely reflects a view to amalgamating the two clubs pursuant to the provisions of the Registered Clubs Act 1976 (NSW). It is not a contract for the purposes of paragraph 104-10(3)(a) of the ITAA 1997 through whose operation the assets change ownership.

As there is no contract for the disposal of club A's assets, paragraph 104-10(3)(b) of ITAA 1997 applies. It provides that the time of disposal is when the change of ownership occurs, that is, at the time the club liquidator transfers the CGT asset under an instrument of transfer to Club B.