Edited version of private advice

Authorisation Number: 1052166065343

Date of advice: 14 September 2023

Ruling

Subject: CGT - beneficial ownership

Question 1

Is the rental income from the two rental properties purchased from the Trust assessable to you?

Answer

Yes. Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.

Rental income is ordinary income and is assessable under section 6-5 of the ITAA 1997.

Question 2

Can you claim the rental expenses relating to my two rental properties purchased from the Trust as a deduction?

Answer

Yes.Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.

Expenses incurred in producing rental income are considered to be an allowable under section 8-1 of the ITAA 1997.

In your case you are the only trustee of the Trust who owned the following two properties:

•         XXX

•         XXX.

You purchased two properties from the Trust and the capital gains tax (CGT) was recorded in the Trust's 20XX income tax return (ITR).

Income and costs associated with the rental properties have been included in your ITRs since 20XX.

While the title of the properties are still in the name of the Trust, you are in possession of the properties and deal with them as if you were the legal title holder. The Trust has no other interest in the properties other than the holding of the legal title.

Since you, as equitable owner can deal with the properties as if you were the legal owner, you also have the benefits and burdens associated with the properties, including taxation matters.

Subsection 104-10(3) of the ITAA 1997 mentions about entering into a contract and only if there is no contract then it is change of ownership. Therefore, ownership is when the contract has been signed by both parties and if there is no contract, at settlement.

In your case the intention of sale and further supported by the Trust claiming the CGT in their 20XX ITR.

You need to declare rental income as required by section 6-5 of the ITAA 1997 and will be entitled to deductions that are allowable under section 8-1 of the ITAA 1997.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

This private ruling is based on the facts and circumstances set out below. If your facts and circumstances are different from those set out below, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are the only trustee of the Trust who owned the following two properties:

•         XXX

•         XXX.

You purchased two properties from the Trust and the capital gains tax (CGT) was recorded in the Trust's 20XX income tax return (ITR).

Income and costs associated with the rental properties have been included in your ITRs since 20XX.

In August 20XX the land transfer forms were signed, stamped and submitted to the titles office to allow the titles to be changed from the Trust to yourself, as an individual.

The sale of the properties were included and CGT recorded in the Trust's 20XX ITR.

Income and loss associated with the rental properties have been included in your ITRs from 20XX -20XX.

You recently became aware the name on the property titles did not transfer and engaged a solicitor to provide advice on completing the transfers.

Relevant legislative provisions

Section 6-5 of the Income Tax Assessment Act 1997

Section 8-1 of the Income Tax Assessment Act 1997

Subsection 104-10(3) of the Income Tax Assessment Act 1997

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