Edited version of private advice

Authorisation Number: 1052012558102

Date of advice: 22 August 2022

Ruling

Subject: CGT - absolutely entitled beneficiary

Question

Will a capital gains tax event happen to a capital gains tax asset you owned just before the transfer of the property to your child?

Answer

No.

A capital gains tax event occurs when there is a disposal of an ownership interest in a capital gains tax asset. However, a capital gains tax event does not occur if there is only a change of legal ownership and not a change of beneficial ownership.

It can be reasonably concluded that at the time of the change of ownership, from you to your child that is, when your name is removed from the property title, that no change of beneficial ownership occurs.

Based on the facts, the Commissioner accepts that in your circumstances, it was never intended for you to have, and you never had, any beneficial ownership of the property.

As you are not the beneficial owner of the property a capital gains tax event does not occur when the property is transferred from you to your child.

This ruling applies for the following periods:

Year ended 30 June 20XX.

Year ended 30 June 20XX.

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Sometime ago your child applied for a housing loan from a Bank to purchase a property.

Your child was denied the loan by the Loan Manager.

You and your child went back to the Loan Manager. They suggested you apply for a loan in your name to purchase the property, which was agreed to by you and approved.

Your child supplied the deposit for the purchase of the property.

You purchased the property.

Your child moved into the property as their main residence.

Your child has made all loan payments relating to the loan.

Your child recently applied for a loan for renovations on the property.

The Loan Manager suggested that your child would be able to service a loan for the full amount for the property in their own right therefore placing the loan and the title of the property in your child's name.

Sometime later you applied for (and were approved) a Government Pension, where you were required to prove the property was not an investment property held by you.

You have provided us with the following information:

Deposit invoice for from the real estate agent for the purchase of the property.

Letter from your Loans Manager stating to his recollection the loan was taken out to assist your child purchase the property.

Letter from your accountant stating that you never intended to purchase the property for your benefit and that it was always the intention for the property to be your child's sole property; and

A Statutory declaration from each of you stating the above facts in all three declarations.

You intend to transfer the property to child - closing your loan and transferring the title of the property from you to your child.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10

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