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This edited version has been archived due to the length of time since original publication.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.

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Edited version of your written advice

Authorisation Number: 1051450268899

Date of advice: 22 November 2018

Ruling

Subject: Capital gains tax - main residence - trust

Question

Is the capital gain or capital loss disregarded?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2018

The scheme commenced on:

1 July 2017

Relevant facts

You and your spouse entered Australia after 20 September 1985. You applied for residency as a refugee.

You commenced employment a short time later.

You incorporated a company called (‘A’). (The company)

You and your spouse decided after a period of time to purchase land and to construct a dwelling on the land. (The dwelling)

You and your spouse were still temporary residents at this time and decided that it would be appropriate for the company to be the registered owner of the land.

You do not have a trust deed in relation to the ownership of the dwelling.

The company is the registered owner of the land.

The company ceased to operate a short time later.

You and your spouse have provided all the funds, including borrowed funds for the acquisition of the land and construction of the dwelling.

You and your spouse have resided at the dwelling.

You and your spouse have been responsible for all costs in relation to the dwelling.

You and your spouse have not paid any rent to the company.

The dwelling has not been included as an asset of the company or the mortgage as a liability in the company’s balance sheets.

The dwelling was listed for sale in 2017.

Settlement occurred in 2018.

A capital gain has occurred as a result of the sale.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 102-20

Income Tax Assessment Act 1997 Section 102-30

Income Tax Assessment Act 1997 Section 103-10

Income Tax Assessment Act 1997 Section 104-10

Income Tax Assessment Act 1997 Section 106-50

Income Tax Assessment Act 1997 Section 108-5.

Reasons for decision

Capital gains tax provisions

Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) states that a capital gain or capital loss is made only if a capital gains tax (CGT) event happens to a CGT asset. The dwelling is a CGT asset.

Under section 104-10 of the ITAA 1997 CGT event A1 happens if you dispose of a CGT asset.

You dispose of an asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner.

In this case, The Company is the legal owner of the dwelling. The sale of the dwelling is a CGT event.

We acknowledge your intention and circumstances surrounding your situation. However, the Commissioner can only consider what actually occurred rather than what was intended to occur.

In your case the company is listed as the transferee on the purchase of the dwelling and as the vendor on the contract for sale.

The legislation applies to what in fact happened rather than what may have been in mind at some earlier or later point in time. As such the sale of the dwelling will be a CGT event under the CGT provisions.

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