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Edited version of your written advice
Authorisation Number: 1051323646590
Date of advice: 2 January 2018
Ruling
Subject: Capital gains tax
Question
Will the sale of the property result in a capital gains tax (CGT) event for you?
Answer
No.
This ruling applies for the following period
Year ending 30 June 2018
The scheme commenced on
1 July 2017
Relevant facts
Several years ago, after 1985, entity A purchased a house. It was the primary residence and entity A lived in the house until their death.
The property was sold a few months after.
Entity A paid for the purchase of the house and all bills including the costs of renovations and ongoing maintenance.
Entity A had a medical illness in their family history. Therefore when the property was purchased, entity A put the property in the names of their adult children.
The house has always been treated as entity A’s house and has never been used by the children for any gain or personal use. No rent has ever been charged/received. It was never included in lists of assets used for loan application by the children. Other than names on the title deed, it has been treated as entity A’s property.
Under the will, the trustee of the deceased estate was to sell, call in and convert into money the estate and given to the children as beneficiaries.
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 108-5
Income Tax Assessment Act 1997 Section 118-195
Detailed reasoning
Capital gains tax provisions
Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) states that a capital gain or capital loss is made only if a capital gains tax (CGT) event happens to a CGT asset. The property is a CGT asset (section 108-5 of the ITAA 1997).
Under section 104-10 of the ITAA 1997 CGT event A1 happens if you dispose of a CGT asset. An individual can be a legal owner but have no beneficial ownership in an asset. It is the beneficial owner that will have a CGT event upon sale of a CGT asset. In some cases, an entity may hold a legal ownership interest in property for another individual in trust.
A change in the legal ownership of an asset without a change in the beneficial ownership will not constitute a disposal for CGT purposes (subsection 104-10(2) of the ITAA 1997).
In your case, you have legal ownership in the property however you were not the beneficial owner. Your relation was the beneficial owner of the property. You will not have CGT consequences as a result of the sale of the property.
Further information on beneficial ownership can be found in Taxation Determination TD 2017/11.