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Edited version of your written advice
Authorisation Number: 1051179778269
Date of advice: 11 January 2017
Ruling
Subject: Capital gains tax
Question
Did you make a capital gain (or loss) when the property was sold in the 20XX-YY financial year?
Answer
No.
This ruling applies for the following period
Year ending 30 June 20YY
1 July 20XX
Relevant facts and circumstances
You were appointed the sole executrix and trustee of your late relative's estate.
It was expressly required by the will that the trustee purchase a property using the proceeds from the sale of the family home for the deceased's relative; individual A.
Individual A had lived with their relatives prior to their deaths in the family home for more than 50 years.
Due to individual A's medical and mental conditions they were dependent on you for the management of their affairs.
Legal advice recommended the title to the property be held in your name due to concerns regarding individual A's mental health.
The State Government gave an exemption of land tax on the purchase as it was proven that you were validly holding title only for the security of individual A
A home was purchased and individual A lived in this property until their death in 20YY.
The property was the sole asset of the late individual A's estate.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 100-20
Income Tax Assessment Act 1997 section 104-10
Reasons for decision
Under section 100-20 of the Income Tax Assessment Act 1997 (ITAA 1997), an entity will make a capital gain or a capital loss if a capital gains tax (CGT) event happens to a CGT asset.
CGT event A1 occurs when you dispose of a CGT asset. You are considered to have disposed of a CGT asset if a change of ownership occurs from you to another entity because of some act or event or by operation of law. The capital gain or capital loss is made at the time of the event (section 104-10 of the ITAA 1997).
Beneficial ownership
A beneficial owner is defined in Taxation Ruling IT 2486 and Taxation Determination TD 92/106. A beneficial owner is the person or entity who is beneficially entitled to the income and proceeds from the asset.
A legal owner is the individual who has their name on the legal documents associated with the CGT asset, an example would be the title deed for a property. An individual can be a legal owner but have no beneficial ownership in an asset. It is the beneficial owner of a CGT asset that is liable for capital gains tax upon sale of the assets.
In some cases, an entity may hold a legal ownership interest in property for another individual in trust.
Application to your circumstances
In this case, the will of your late relative directed that their principle residence be sold and part of the proceeds be used to purchase a home for individual A. Due to legal advice, the title to the property was placed in your name. Individual A used this property as their main residence until they passed away in 20YY.
While the legal title of the property was held in your name we accept that the beneficial owner of the property was individual A. Therefore, when the property was sold you did not make a capital gain (or loss).