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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1051249277884

Date of advice: 14 July 2017

Ruling

Subject: Capital gains tax - legal v beneficial ownership

Question

Did a capital gains tax event happen when title to the property was transferred?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 2017

The scheme commenced on:

1 July 20XX

Relevant facts

You and your spouse engaged a solicitor in 20XX.

The solicitor provided some estate planning advice concerning relevant state probate process. It was agreed that to avoid potentially large probate expenses in the future that the ownership of your main residence would be transferred into joint names. (The advice as evidenced by the solicitor’s file note)

You have provided a number of documents which forms part of and should be read in conjunction with this private ruling.

The main residence was made up of Z certificates of title and was held in safe custody by the solicitor.

The solicitor also held in safe custody title to a separate investment property. (The investment property)

You inherited an interest in this property. You acquired sole ownership after a period of time.

The property has been used to produce assessable income during the ownership period.

The solicitor mistakenly transferred the XY titles and not the Z titles in 20XX.

The transfer of the investment property was in contravention to the advice provided by the solicitor.

The error was discovered a short time later when you visited your accountants and were advised that all of the titles had been transferred and that capital gains tax (CGT) would apply on the transfer of the investment property.

The title to the investment property was subsequently transferred from joint names to your name as sole owner.

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

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 declares income, who can claim deductions and who owns a CGT asset for income tax purposes.

In the absence of evidence to the contrary, property is considered to be owned by the person(s) registered on the title.

However, CGT event A1 does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner. Where beneficial ownership and legal ownership are not the same, there must be evidence that the legal owner holds an asset on trust for the beneficial owner.

We are satisfied that you were always absolutely entitled to the property and remained the beneficial owner of the property as you did not intend to dispose of your ownership interest.

Accordingly, no change in beneficial ownership occurred with the first transfer of the investment property or when the correction to the title was registered. Therefore, CGT event A1 did not occur at either time.


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