Edited version of private advice

Authorisation Number: 1052122552274

Date of advice: 25 May 2023

Ruling

Subject: Capital gains tax

Question

Did a capital gains tax (CGT) event A1 happen to you on the sale of the property?

Answer

No.

A CGT event A1 occurs when there is a disposal of an ownership interest in a CGT asset. A CGT event A1 may arise when property is sold.

Under section 118-130(1) of the Income Tax Assessment Act 1997 (ITAA 1997), to have an ownership interest in the land, you must have a legal or equitable interest in it, or a right to occupy it. To have an ownership interest in a dwelling that is either a flat or a home unit, you must have legal or equitable interest in it, a licence or right to occupy it or a share in a company that owns legal or equitable interest in the land on which the flat or home unit is erected and that gives you to a right to occupy it.

The legal owner of the property is recorded on the title deed for the property issued under that State's legislation. It is possible for legal ownership of property to differ from beneficial ownership. An individual can be a legal owner but have no beneficial ownership in an asset. Where beneficial ownership and legal ownership of an asset are not the same, there must be evidence that the legal owner holds the property on trust for the beneficial owner. A beneficial owner is defined as a person or entity who is beneficially entitled to the asset.

In your case, there was no agreement in place or other evidence provided to indicate that you had a beneficial ownership interest in the land and dwellings that were constructed on the property.

Therefore, at the time of disposal of the property, you did not have an ownership interest in the property for CGT purposes.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

In 19XX, your father purchased a property (the property).

Your father lived at the property with your mother.

Whilst living in the property, your mother and father had X children.

In 19XX, your father decided to rent the property and your family moved into an additional property.

In 19XX, you and your siblings executed a partnership agreement to develop the property by demolishing the existing dwelling and surrounding buildings to construct two units.

The agreement was signed between your father (as the owner of the property), yourself, and your siblings and outlined that you and your siblings would fund the cost of the development equally.

Your parents later contributed to a portion of the development costs.

The total cost of the demolition and construction of the two units was $XXXX

In 19XX, the demolition and construction were completed and both units were rented.

The net rental was divided into four equal parts. One part was paid to your father and the other parts were paid to you and your siblings.

In 19XX-19XX, you lived in one of the units rent free for several months.

In 19XX, your father passed away.

After your father passed away, their portion of the rent was paid to your mother.

Your father's will lists your mother as their sole executor and beneficiary.

In October 20XX, Probate was granted.

In October 20XX, your mother became the registered sole owner of the property.

In 20XX, your mother moved from her home to an aged care facility and remains living there.

In 20XX, your mother and your siblings decided to sell the property.

In June 20XX, a contract of sale was executed.

In August 20XX, settlement of the sale occurred.

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 118-130

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