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Edited version of your written advice
Authorisation Number: 1051330181180
Date of advice: 23 January 2018
Ruling
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
Entity A purchased a house as their primary residence and lived in the house until their death recently.
The property was sold soon 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 family history of dementia and was afraid of following down the same path. Therefore when the property was purchased, they put it in your name.
The house has always been treated as entity A’s house and has never been used by you or other relations 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 you. Other than names on the title deed, it has been treated as entity A’s property.
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. Entity A 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.