Edited version of private advice

Authorisation Number: 1051952645614

Date of advice: 24 February 2022

Ruling

Subject: Sale of CGT asset with a beneficial interest in the property

Question

Can the Company disregard all income tax implications associated with the disposal of Individual X one third interest in the Property?

Answer

Yes

On the basis of the executed deeds and actions of the parties, the Commissioner accepts that Individual X beneficially owned a one third interest in the Property. Therefore, the sale of the Property resulted in a disposal of Individual X's one third interest to the third-party purchaser (section 104-10 of the Income Tax Assessment Act 1997).

This ruling applies for the following period:

Financial year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

A property (the Property) was acquired. The Company held title of the Property during the entire period of ownership.

Individual X and their late spouse had contributed one third of the purchase price for the property as well as all the cost and the majority of the ongoing costs throughout the ownership period.

The Company contributed the other two thirds of the purchase price.

The Company was required to mortgage the Property to obtain the finance required for its two thirds interest, for simplicity, the Property was registered in the name of the Company.

The Company's two thirds contribution to the purchase price was arranged by the Company's director at the time, who was the child of Individual X and their late spouse.

It is understood that the director wanted to assist their parents in securing a permanent residence they would not have been able to afford otherwise, for reasons of natural love and affection.

The following conditions formed part of the agreement in relation to the Property at or around the time of purchase, between the director (on behalf of the Company), Individual X, and their late spouse:

•         Individual X and their late spouse would occupy the Property exclusively as their main residence as long as they wished.

•         The title of the Property would be in the name of the Company, with a one third beneficial ownership interest remaining with Individual X and their late spouse.

•         No rent would be charged to Individual X and their late spouse whilst they occupied the Property in recognition of their interest in the property.

•         Individual X and their late spouse would attend to all aspects of managing the Property during the period of ownership, including payment of all holding and occupancy costs.

•         Individual X and their late spouse would be the sole representatives for the parties in matters relating to the body corporate and be responsible for all day-to-day decisions for the running of the Property.

•         The Company would pay all interest incurred on its borrowings for the Property purchase.

Individual X and their late spouse lived together in the property until the spouse passed away. Individual X continued to live at the property exclusively over an extended period.

An account of the Property expenditure incurred by Individual X and their late spouse during the ownership period has been provided to this office.

The director of the Company who arranged the purchase has recently passed away.

The Company has recently appointed a new sole director.

The Company and Individual X agreed recently to sell the Property. Individual X relocated to a smaller property so that the Property could be prepared for sale.

The Property has now been sold and settled.

The conditions agreed at the time of purchase and subsequent conduct has been acknowledged in recent proceedings between the parties.

Individual X one third beneficial interest in the property was confirmed, firstly a Deed of Charge prior to the property settlement. Subsequently a Deed of Settlement was entered at the time of the Property settlement incorporating settlement terms in favour of Individual X representing her one third interest in the Property.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 108-5

Income Tax Assessment Act 1997 section 118-110

Income Tax Assessment Act 1997 section 118-130

Income Tax Assessment Act 1997 section 995-1