Edited version of private advice

Authorisation Number: 1051973351053

Date of advice: 28 April 2022

Ruling

Subject: CGT - beneficial and legal ownership of a property

Question

Will the net capital gain assessable to the Taxpayer on the sale of the property be calculated by reference to a XX% beneficial interest in the property held by the Taxpayer?

Answer

Yes. We accept that the beneficial owner of the Property is different to the legal owners, with the Taxpayer having a beneficial ownership interest of XX% in the Property since the purchase date. Therefore, when the CGT A1 event occurred, the Taxpayer is liable for capital gains tax (CGT) calculated using the beneficial ownership of XX%.

This ruling applies for the following periods:

Income year ending 30 June XXXX

The scheme commences on:

1 July XXXX

Relevant facts and circumstances

This private ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are different from these facts, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

The Taxpayer is a registered proprietor of the property as a tenant in common in equal shares with his siblings.

The purchase price was $X. The contract for purchase of the Property was after 20 September 1985.

The Taxpayers parents made a contribution of $X towards the purchase price of the property, (that is, XX% of the total purchase price).

At the time of the purchase, the property was registered in the names of the children. The Taxpayer being one of these children.

The amount that was paid on behalf of the children was sourced from funds from an inheritance left to the children by their grandparent, where it was agreed that these funds would be used by their parents to buy the property.

The purchase of the property being solely under the children's names (and not the parents) included the following reasons:

•                To show that their inheritance had been used to purchase a share in the property

•                To protect their contribution to the property in the event that something unfortunate happened to their parents that may impact the property since they contributed to it by way of their inheritance, and

•                To provide for the children in the future.

There was a family agreement (undocumented) that included the point that the parents would not be registered on the title but that they would retain a beneficial ownership interest.

An agreement (the Tenancy agreement), created a lifetime right for the parents to occupy the residence.

The Tenancy agreement stated the following;

Clause 2 stated that the occupiers (the parents) "shall be entitled to assign their rights hereunder and to sublet their interest in the residence or give up possession of the same and their rights hereunder as they see fit and without prior reference to the owners"

One of the Taxpayer's parent passed away in XXXX and the other parent passed away in XXXX.

The parent's will was based on the premise that her estate included the interest in the property, as calculated by reference to the parent's original contribution.

The Property was the Taxpayer's parent's main residence during the time it was purchased until they passed away.

The Property was sold in XXXX for $X. The proceeds from the sale of the property were equally distributed to the three children in accordance with their mother's will.

During the period of legal ownership, the taxpayer had a beneficial ownership proportion of XX%. On sale of the property CGT event A1 applied to the taxpayer based on an ownership interest of XX% of the property.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10