1012573134246 | Legal database

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Edited version of your private ruling

Authorisation Number: 1012573134246

Ruling

Subject: CGT - other

Question

Does the transfer of the property to you as a sole beneficiary of the trust create capital gains tax consequences for you?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2015

The scheme commences on

1 July 2014

Relevant facts and circumstances

The Deceased passed away in 19xx

The Deceased was a foreign resident.

The terms of the will provided that a 50% share in the income of the estate be paid to you for life, or until the death of your spouse.

You are an Australian resident.

Your spouse passed away in 20xx.

The trust was transferred from the foreign country to an Australian law firm where an Australian solicitor was appointed as Nominee to the trust.

The Nominees purchased a house.

The trust contributed the majority and you contributed the balance towards the purchase price.

You have lived in the house since it was purchased as your main residence.

The Nominees are registered on the title together with the life interest of the beneficiary.

The life interest was registered as a charge over the property.

As directed under the terms of the will the property will be transferred to you.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 160-50.

Income Tax Assessment Act 1997 section 960-E.

Reasons for decision

A capital gain or capital loss may result if a CGT event happens to a CGT asset in which you have an ownership interest. CGT event A1 in section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) happens if you dispose of your ownership interest in a CGT asset. You dispose of that interest if a change of ownership occurs from you to another entity.

In most cases, legal ownership is determinative of who owns the CGT asset for income tax purposes and in the absence of evidence to the contrary, property is considered to be owned by the person(s) registered on the title.

However, in some cases actual ownership of an asset may be shown to lie with the beneficial owner instead of the legal owner. Where it can be shown that there is an absolute entitlement to a CGT asset, as evidenced by a trust agreement, then the beneficiary of the trust will be considered the beneficial owner of the CGT asset, and therefore the actual owner for the purposes of the CGT provisions.

Draft Taxation Ruling TR 2004/D25 explains the circumstances where a beneficiary of a trust is considered to be absolutely entitled to a CGT asset as against the trustee.

The Ruling contains the view that the requirements of absolute entitlement within the context of the CGT provisions cannot be satisfied if there are multiple beneficiaries in respect of a single asset.

However, subdivision 960-E of the ITAA 1997 defines an entity, and states that the trustee of a trust is taken to be an entity consisting of the person who is the trustee, or the persons who are trustees, at any given time.

Section 106-50 of the ITAA 1997 provides that for a beneficiary who is absolutely entitled to a CGT asset as against the trustee of the trust, any act done by the trustee in relation to the asset will be as if the beneficiary had done it.

In this case, you are absolutely entitled to the remainder of the deceased estate and the Trustees of the Deceased estate are absolutely entitled to property. Therefore, you are absolutely entitled to the property, which is held by the Nominees. There will be no change in beneficial ownership when the property is transferred from the Nominees to you. Therefore there will be no capital gains tax consequences for you.

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