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Edited version of private advice
Authorisation Number: 1051682162117
Date of advice: 20 May 2020
Ruling
Subject: Absolute entitlement - capital gains tax
Question
For the purposes of section 106-50 of the Income Tax Assessment Act 1997 (ITAA 1997), was Person A absolutely entitled to the property at all times as against Person B who held the property as trustee?
Answer
Yes. At all times Person A was absolutely entitled to the property as against Person B as trustee. Any capital gains tax event that happens upon the sale of the property would happen to Person A.
Question
Does any capital gains tax event happen to Person B upon the disposal of the property?
Answer
No. Because Person A was absolutely entitled to the property at all times as against Person B as trustee, no capital gains tax event will happen to Person B. Any capital gains tax event will happen to Person A.
Question
Can Person A choose to apply the main residence exemption under section 118-110 of the ITAA 1997 to disregard any capital gain that arose from the disposal of the Property?
Answer
Yes. As Person B qualifies for the main residence exemption, they can disregard any capital gain made upon the disposal of the Property.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
Person A wished to purchase a main residence. As they were not in a position to borrow sufficient funds, their parent, Person B, offered to purchase the dwelling outright in their name, using their own funds.
There was a family arrangement that Person B would property for the benefit of Person A
Person A repaid the loan to Person B.
Person A paid all the outgoings in respect of the property.
Upon the sale of the property, Person A received all the capital proceeds. No proceeds were paid to Person B.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 106-50
Income Tax Assessment Act 1997 Section 118-110