Edited version of private advice

Authorisation Number: 5010089701917

Date of advice: 11 April 2023

Ruling

Subject: Resulting trust and CGT event A1

Question

If the Property were sold, would this result in CGT event A1 under section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) to happen to both A and B?

Answer

Yes

This ruling applies for the following period:

1 July 20XX to 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The Property was purchased under a contract dated XX XXXX (the Contract).

The Contract noted the Purchaser as 'A and/or Nominees'.

The Contract was signed by A. A affirms that it was always their intention that both them and their spouse B would be nominated as joint purchasers of the Property.

A states that they instructed the solicitor engaged to conduct the purchase of the Property, that the owners of the Property were to be both themself and B as equal joint tenants. A believed the Property was in joint names until they discussed selling the Property with their solicitor in XXXX and discovered that their instructions for the Property to be put in both their and B's name was not carried out and that the Property was only in their name.

A and B have been married for over X years. During their marriage, they have owned significant real estate holdings and have always held the real estate jointly.

From the time the Property was purchased in XX XXXX, A and B have equally contributed money for the purchase of the Property and have shared all profits and expenses relating to the Property equally.

The XXXX Land Tax Assessment Notice of the X State Revenue Office records the Property (along with other properties) as being jointly owned by both A and B.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 subsection 104-10(1)

Income Tax Assessment Act 1997 subsection 104-10(2)

Reasons for decision

Based on the facts provided, it is accepted that it was the intention of A that B become half owner (as equal joint tenant) of the Property at the time the Property was purchased on XX XXXX and that by legal error this did not occur. This is supported by A and B sharing equally all income and expenses relating to the Property from the time it was purchased in XX XXX and the Land Tax Assessment Notices recording the Property as being jointly owned by A and B.

Under trust law, where a person causes the conferment of title to property on party A, but without bringing about a complete disposition of the beneficial interest in that property, then the title holder is deemed by operation of law to hold that interest on resulting trust[1] for party A.

Based on the above trust law, it is accepted that at the time the Property was purchased on XX XXXX, A as title holder, held half of the Property on trust for B under a resulting trust. Accordingly, B held a half beneficial ownership interest in the Property from XX XXXX.

Section 104-10 states:

104-10(1)

CGT event A1 happens if you dispose of a CGT asset.

104-10(2)

You dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner.

Accordingly, if the Property is sold, this will result in CGT event A1 under section 104-10 to happen to both A and B as equal owners of the Property.

[1] A resulting trust is also called an implied trust.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).