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Edited version of your private ruling
Authorisation Number: 1012109659183
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Ruling
Subject: Trusts
Question: Can you disregard any capital gain on the transfer of title for the property to your family member?
Answer: Yes.
This ruling applies for the following periods:
Year ending 30 June 2013
The scheme commences on:
1 July 2011
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You and your family member purchased a property.
This property was purchased for your other relatives.
You thought you had yourself removed from the title deed.
Your relative died and it was discovered that you had in fact not been removed.
You have always considered the property to be your other relatives.
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 106-50.
Income Tax Assessment Act 1997 Section 118-110.
Reasons for decision
You make a capital gain or capital loss as a result of a capital gains tax (CGT) event happening (section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997)).
The most common event (CGT event A1) happens if you dispose of a CGT asset to someone else (section 104-10 of the ITAA 1997). In this situation, this will be the transfer of your interest in the property located at 8 Sloane avenue.
When considering the transfer of a CGT asset, the most important element in the application of the CGT provisions is ownership. It must be determined who is the legal owner of the asset and who is its beneficial owner.
In absence of information to the contrary, property is considered to be both legally and beneficially owned by person(s) registered on the title. (An exception is if the property is held in the name of someone other than a spouse or child of the owner). Evidence may include documents that show the registered owner holds the property on trust for someone else.
It is possible for legal ownership to differ from beneficial ownership. Where beneficial ownership and legal ownership of an asset are not the same, there must be evidence that the legal owner holds the property in trust for the beneficial owner.
In your case the issue to be considered is:
Were your family members the beneficial owners of the property?
Has a trust been created?
Where another person purchases and pays for a property but legal title to it is transferred to you at their direction, if that person is a stranger, the presumption of resulting trust applies and you hold the property on trust for them. But where the property is transferred to you by your parent or spouse, the presumption of resulting trust is replaced by the presumption of advancement which deems the purchase to be prima facie an advancement (that is an absolute gift).
The consequence of the presumption of advancement being upheld is that the parties will hold their equitable interests in the property in the same proportions as their legal interests.
While it is possible to rebut the presumption of advancement, this requires acceptance that one party holds an interest in the property on behalf of the other party.
In your situation it is considered that you and your family member have always held the property in trust for your family members based on the following:
There is a trust deed stating that the property is held in trust for the family members
You have always considered the property to be your family members.
Thus, on the balance of the facts and evidence provided, the Commissioner is satisfied that the property was held on trust for your family members by you and another family member
In conclusion, you will be able to disregard any capital gain or capital loss on the transfer of the property.