Edited version of private advice

Authorisation Number: 1051990060979

Date of advice: 5 July 2022

Ruling

Subject: Capital gains tax

Question

Did CGT event A1 in section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) happen to you when you disposed of the property?

Answer

Yes, the event happened to you when you disposed of your ownership interest in the property.

Question

Are you liable to pay tax on the amount you received as your share of the capital proceeds from the sale of the property?

Answer

Yes. Based on the facts provided, the Commissioner accepts that in your circumstances, although your name solely was on the title of the property, it was not intended for you to have full beneficial ownership of the property. It can be reasonably concluded that at the time of change of ownership, that is, when the property was sold, you disposed of your partial ownership interest in the property. As such, you are only subject to CGT on the amount you received as your share of the capital proceeds from the sale of the property.

Therefore, your assessable income in the year the property was sold would include your net capital gain from your share of the capital proceeds. You work out your net capital gain by applying the steps set out in subsection 102-5(1) of the ITAA 1997.

Main residence exemption

You have never used the property as your main residence from the time of purchase to the time of its disposal. Therefore, the main residence exemption in section 118-110 of the ITAA 1997 does not apply to you.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The property was purchased in April 20XX for a certain amount.

The property was purchased with funds provided by you, by your sibling and by your parents who paid for the deposit.

You took out a loan to contribute to the purchase the property.

You took out the loan because your sibling was unable to as your sibling was not working at the time.

Your sibling was in an abusive marriage that had broken down. Your sibling and their young children were in a vulnerable position and needed a safe home.

The title of the property was placed solely in your name to prevent the property being caught up in your sibling's divorce settlement.

You originally intended to live in the property with your sibling, however, this never occurred.

You lived in a different city and you frequently commuted between your residence and the property for some time to assist your sibling staying at the property.

The property was the main residence of your sibling.

You did not receive or request rent from your sibling.

Your sibling paid all expenses and outgoings to maintain the property.

The property never earned income.

You repaid the remaining balance of the loan in 20XX.

You purchased a house in another city and treated it as your main residence.

The property which your sibling used as their main residence was sold in June 20XX resulting to a capital gain.

You received a share of the capital proceeds which is in line with your original contribution.

Your sibling used their share of the proceeds to purchase a new main residence.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 118-110

Income Tax Assessment Act 1997 subsection 102-5(1)