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Edited version of private advice
Authorisation Number: 1051602657075
Date of advice: 30 October 2019
Ruling
Subject: Beneficial ownership
Question 1
Are you considered to be the sole beneficial owner of your property and as such required to declare all rental income and expenses in your personal tax return?
Answer
Yes.
Question 2
Will you be solely liable for any capital gain or capital loss that will occur if you decide to sell the property?
Answer
Yes.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You purchased a property.
At the time the bank would not lend you sufficient money to purchase the property only in your name as you were deemed to have insufficient income.
Your relative volunteered to assist in the purchase in name only.
Your relative has never resided in the property, nor have they contributed to the mortgage or the ongoing maintenance of the property.
It was the intention of both parties that your relative would not hold an interest in the property, but hold it on your behalf as it was only done to meet the bank's lending requirements so that you could purchase your own residence.
You now wish to either sell the property or to put it on the rental market.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 104-10
Reasons for decision
Section 6-5 of the Income Tax Assessment Act 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during an income year. Rent is regarded as ordinary assessable income.
Taxation Ruling TR 93/32 explains that the net loss or income from a rental property must be shared according to the legal interest of the owners, except in those very limited circumstances where there is sufficient evidence to establish that the equitable interest is different from the legal title. An example of where the equitable interest may differ from the legal interest is when an owner is holding their share as trustee for the other owner.
Capital gains tax (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.
It is the beneficial owner of a CGT asset that is liable for capital gains tax upon sale of the assets.
In your case, it is accepted that you are the sole beneficial owner of your property. Any income derived from renting the property and any capital gain or loss that occurs in relation to the sale of the property should therefore be only declared by you as you are the sole beneficial owner of the property.