| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011732881772
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: Transfer of ownership - land
Question
Does the transfer of your share in a property trigger capital gains tax event (CGT) event A1?
Answer: No.
This ruling applies for the following periods
Year ended 30 June 2011
The scheme commenced on
1 July 2009
Relevant facts
In the mid 1990s you were transferred a share in a property.
The share in the property was transferred to you under the agreement that your sibling would have the full use and benefit of the property and was considered the owner of the property.
Your sibling leased out the property and received the rental income and paid for all of the repairs, maintenance and outgoing expenses.
The council, water rates and insurance on the property are all in your sibling's name.
Recently your sibling requested that you transfer your interest in the property to them.
You refused to transfer your interest in the property to your sibling and Court proceedings commenced.
The proceedings settled and the court ordered that you had no beneficial interest in the property and would transfer your legal interest to your sibling.
As part of the settlement agreement your sibling will indemnify you for any capital gains tax liability that may arise as a result of the transfer of your interest in the property to your sibling.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10.
Income Tax Assessment Act 1997 Section 106-50.
Reasons for decision
You make a capital gain or a capital loss if and only if a capital gains tax (CGT) event happens to a CGT asset.
CGT event A1 will happen when you dispose of a CGT asset to someone else.
Legal v beneficial ownership
When the disposal of an asset occurs one of the most important elements in the application of the CGT provisions is ownership; both legal and beneficial ownership must be determined. In most cases, in the absence of evidence to the contrary, property is considered to be owned absolutely by the person(s) registered on the title.
It is possible for legal ownership to differ from beneficial ownership. In such cases, a trust relationship exists with the legal owner (trustee) holding the property in trust for the beneficial owner (beneficiary). The CGT provisions do not apply to the legal owner of a dwelling if that legal owner holds it in trust for another person and that other person was absolutely entitled to that dwelling as against the trustee (section 106-50 of the ITAA 1997).
As the court has determined that you were holding the property in trust, and your sibling was absolutely entitled to the property a CGT event has not occurred upon the transfer of your one third interest in the property to your sibling.