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Edited version of private advice
Authorisation Number: 1052100998710
Date of advice: 23 March 2023
Ruling
Subject: CGT - legal v beneficial ownership
Question 1
Did CGT event A1, or another CGT event happen to Person A when the Property was sold?
Answer
No. Having considered your circumstances and the relevant factors relating to your situation, the Commissioner accepts that although Person A was a legal owner of the Property, it was never intended for them to have any beneficial ownership of the Property. Therefore, Person A did not have a CGT event A1 or any other CGT event occurring to them when the Property was sold.
Question 2
Is Person B entitled to a full main residence exemption on the sale of the Property?
Answer
Yes. Person B is entitled to the full main residence exemption on the sale of the Property because:
- they own the house as an individual Australian tax resident
- the house was their main residence and it was not used for income producing purpose throughout the whole ownership period, and
- the land which contains the house is less than two hectares.
Therefore, any capital gain or capital loss Person B made from the sale of the Property will be disregarded.
Further information about the main residence exemption can be found by searching 'QC 66028' on ato.gov.au
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
The Property was purchased as a home for Person B.
The Property has been Person B's home since purchase up until the sale and has never been income producing during the ownership period.
At the time of purchase, Person A made a gift to Person B in order to assist in the purchase of the Property. Person A was and is in a substantially better financial position than Person B and was able to assist with the gift.
At the time of purchase, Person B was suffering from a diagnosed mental illness. It was felt that the purchase of a home would be a great help in stabilising Person B's situation and could only help with ongoing treatment.
In order to provide an additional safeguard for Person B, the property was purchased with Person A as a joint tenant. This was done deliberately to negate the family's apprehension regarding Person B's mental health and to reduce concerns about them not always acting in their own best interests.
During the full period of ownership, Person B has lived in and maintained the property and all property costs have been funded solely by them.
The Property has now been sold.
The sale proceeds have been paid directly to Person B and the use of such funds is for him alone to determine. No amounts are to be paid to Person A.
The Property was under 2 hectares in size.
Person A has never lived in the Property and no funds have changed hands between the parties relating to the Property other than the initial gift.
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 118-110
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