Edited version of private advice

Authorisation Number: 1051979697065

Date of advice: 12 May 2022

Ruling

Subject: Capital gains tax

Question

Will CGT event A1, or another CGT event happen when you remove your parents' names from the title of property A and property B?

Answer

No

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were unable to secure finance and your parents were included on the finance and titles of the properties.

You acquired property A in 20XX and property B in 20YY.

Property A has produced rental income since acquisition. You keep and receive all the rental income and pay all the rental expenses associated with this property.

Your parents do not declare any rental income or expenses in their tax returns.

When you acquired property B in 20YY, this became your main residence

Your parents have not resided at property A or B and have never treated either property as their main residence.

Although your parents were party to each mortgage, they never make repayments to the loans or contribute in any way financially to the purchase or upkeep of property A or B.

Your parents have never treated property A or B as an asset of theirs.

In 20ZZ, you and your parents executed a property deed agreement confirming they do not claim any interest to either property and that any profits, or funds made from the sale of either property in the future will be solely kept by you.

You are now in a position to refinance property A and property B in your own name. Consequently, you intend to refinance both mortgages and remove both your parents' names from the titles and the loans.

There will be no consideration paid to you for relinquishing their legal ownership.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 102-20

Income Tax Assessment Act 1997 Section 104-10

Reasons for decision

CGT event A1 occurs when there is a change in ownership of a CGT asset. However, CGT event A1 does not occur if there is only a change of legal ownership and not a change of beneficial ownership.

Your parents agreed to be the registered legal owners of property A and property B, but without any expectation of having any elements of beneficial ownership of the properties. They have not lived in either property. They did not intend to, and do not, incur any expenses of ownership of the properties, including mortgage payments. They did not intend to, and do not, obtain rent in respect of their legal ownership of property A. They did not intend to, and will not, obtain any benefit from any future sale of property A or property B.

Based on the facts, the Commissioner accepts that in your circumstances, that although your parents were legal owners of property A and property B, it was never intended for them to have any beneficial ownership of the properties and it can be reasonably concluded that when the time to change the legal ownership of property A and property B, and when their names are removed from the titles, that no change of beneficial ownership occurs.

They will not have a CGT event A1 or any other CGT event occurring when you remove their names from the title of the property. Also, the rental income is derived by you the beneficial owner, and as such any rental income or rental loss that arises is included in your assessable income.

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