Edited version of private advice

Authorisation Number: 1052134251228

Date of advice: 28 June 2023

Ruling

Subject: CGT - legal and beneficial ownership

Question

Are you considered the sole beneficial owner of the property for capital gains tax (CGT) purposes?

Answer

Yes.

CGT event A1 occurs when there is a disposal of an ownership interest in a CGT asset. A CGT event A1 may arise when property is sold.

Your parent agreed to be the registered legal owner of the Property, but without any expectation of having any beneficial ownership of the Property. Your parent did not live in the Property and did not incur any expenses of ownership of the Property including the mortgage repayments, rates, utilities, repairs, and maintenance costs.

Based on the facts, the Commissioner accepts that in your circumstances, you were the beneficial owner of the Property.

Question

Are you entitled to a partial CGT main residence exemption in respect of the period you lived in the property, being from October 20XX to February 20XX in accordance with section 118-185 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

You did not move into the Property until two years after it was purchased and rented it during throughout that period to assist in paying the mortgage repayments.

You then moved into the Property and treated it as your main residence throughout your remaining ownership period and did not use it to produce assessable income.

Therefore, you are entitled to a partial main residence exemption in accordance with section 118-185 of the ITAA 1997.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

In October 20XX, you were interested in purchasing a property.

You approached Bank A to obtain pre-approval for a mortgage to finance the purchase of the Property.

Due to your personal circumstances, Bank A requested that your parent be included as a registered proprietor on the title and as a joint borrower under the mortgage.

To secure finance for the purchase of the Property, you and your parent agreed to this arrangement.

You both also agreed that although your parent's name would be on the title, you would pay for the purchase of the property and your parent would have no interest in the Property.

There are no documents between you and your parent to record this agreement.

In October 20XX, the Property was purchased by you and your parent in equal proportions for $XXXX.

Your parent gifted you $XXXX to assist with the deposit.

You paid the remainder of the purchase price and the mortgage repayments.

After the Property was purchased, you were unable to fund the mortgage repayments and leased the Property from October 20XX until October 20XX when your financial situation changed.

You leased the Property for $XXX per week.

The rental income was deposited into a Bank A mortgage account and was used to make the mortgage repayments.

Your parent did not have any involvement in leasing the property as they considered it to be your property.

You refinanced the loan with Bank B and proceeded to make all further mortgage repayments to Bank B.

You moved into the Property in November 20XX and lived there until February 20XX when it was sold.

The Property was your main residence from the time that you moved in until it was sold and was not used to produce assessable income.

Since the Property was purchased, you have paid all the expenses relating to the property including renovation costs, repairs and maintenance, rates, and utilities.

Your parent has never lived at the Property.

Your parent did not contribute to the mortgage repayments, rates, utilities, repairs and maintenance, or other expenses associated with the Property.

Your parent did not receive any income or rent from the Property.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 102-20

Income Tax assessment Act 1997 Section 106-50

Income Tax Assessment Act 1997 Section 118-110

Income Tax Assessment Act 1997 Section 118-125

Income Tax Assessment Act 1997 Section 118-135

Income Tax Assessment Act 1997 Section 118-185