Edited version of private advice

Authorisation Number: 1052254734060

Date of advice: 28 May 2024

Ruling

Subject: CGT - legal v beneficial ownership

Question

Did capital gains tax event A1 happen to you when you transferred the Property to your parents?

Answer

No.

Capital gains tax (CGT) event A1 occurs when there is a change in ownership of a CGT asset under section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997). However, CGT event A1 does not occur if there is only a change of legal ownership and not a change of beneficial ownership.

Having considered your circumstances and the relevant factors relating to your situation, the Commissioner accepts that although you had a legal ownership interest in the Property, it was never intended for you to have any beneficial ownership of the Property.

Therefore, neither CGT event A1 nor any other CGT event happened to you when your legal ownership ended when the Property was transferred.

This ruling applies for the following period:

Year ending 30 June 2024

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

Your parents owned a property (the Property).

You, your parents and your sibling lived in the property as your main residence.

A few years after your parents acquired the Property, your parents experienced some financial difficulties.

In month 20XX, to prevent the loss of the family home, it was agreed that you would purchase the Property for its market value.

You took out a loan for $X to assist you to make the purchase. The loan was first with Bank A but was refinanced later that year to Bank B.

At the time of the purchase, you intended that the title to the Property would be transferred back to your parents when they could no longer live in the Property and needed to downsize and/or move into a retirement village.

You made a handwritten note of your intentions on a letter from Bank B dated XX September 20XX that confirmed the approval of your application for a home loan.

Your parents were liable for all ongoing holding costs, including completing any and all repairs, maintenance and upkeep of the Property.

The loan repayments have been made by your parents.

You continued to live in the Property with your parents for another six years, before moving out and purchasing another property with your partner. Your parents remined in the Property.

You did not consider the Property to be yours.

During your recent divorce settlement the Property was excluded from any negotiations.

You have provided the following documents to support your intentions that the Property was not yours:

• An email between you and your lawyer which discussed your attempts to have the title changed from your name to your parents, and an explanation about your then spouse's understanding that your parents owned the Property.
• A letter from your lawyer to your spouse's lawyer in preparation for the upcoming mediation. The letter detailed the asset pool and specified the ownership of the property as being 'on trust for parents'.

One of your parents is now experiencing some health issues and as such they need to downsize their Property.

One of your parents recently withdrew money from their super fund and paid out the balance of the home loan. The title for the Property was then transferred from your name into their names.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 102-20

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 106-50

Income Tax Assessment Act 1997 section 108-5

Income Tax Assessment Act 1997 Subdivision 104-B