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Edited version of your written advice
Authorisation Number: 1013020780566
Date of advice: 20 May 2016
Ruling
Subject: CGT Event
Question
Did a CGT event occur under Division 104 of the Income Tax Assessment Act 1997 (ITAA 1997) when the beneficiary turned 18 or 21 years of age or when legal title of the property was transferred from the trustee into the beneficiary's name after the beneficiary turned 21?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2015
The scheme commenced on
1 July 2014
Relevant facts and circumstances
Various beneficiaries received all but the rest and residue of the deceased's estate.
One beneficiary was entitled to the rest and residue of the deceased's estate.
That beneficiary was a minor at the date of the deceased's death.
The trustee of the deceased estate considered that the best use for that beneficiary of the funds that made up the rest and residue of the deceased's estate was to purchase a property for the beneficiary to live in.
After that beneficiary turned 21 the trustee transferred the legal title of the property to them.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 100-20(1)
Income Tax Assessment Act 1997 Subsection 104-10(1)
Income Tax Assessment Act 1997 Subsection 104-10(2)
Income Tax Assessment Act 1997 Subsection 104-10(3)
Reasons for decision
Subsection 100-20(1) of the Income Tax Assessment Act 1997 (ITAA 1997) states you can make a capital gain or loss only if a CGT event happens.
Subsection 104-10(1) of the ITAA 1997 states CGT event A1 happens if you dispose of a CGT asset.
Subsection 104-10(2) of the ITAA 1997 states 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.
Subsection 104-10(3) of the ITAA 1997 states the time of the event is:
(a) when you enter into the contract for the disposal; or
(b) if there is no contract - when the change of ownership occurs.
In the present case, for a CGT event to occur there must be a disposal of a CGT asset.
It is considered that the beneficiary was absolutely entitled to the rest and residue of the estate when it was applied for their benefit and the property was purchased. The property was held on bare trust for the beneficiary by the trustee of the deceased estate from when the property was purchased.
As the beneficiary is considered to be absolutely entitled to the property since its purchase, their turning 18 and 21, and the transfer of the legal title to them did not result in a CGT event.