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Edited version of private advice
Authorisation Number: 1052211624590
Date of advice: 25 January 2024
Ruling
Subject: CGT - legal vs beneficial ownership
Question
Will a capital gains tax A1 event occur in respect of your ownership interest if the property is disposed of?
Answer
No.
Based on the facts, the Commissioner accepts that in your circumstances, although you are a legal owner of the property, you do not have any beneficial ownership of the property. This means a CGT event will not occur for you when you are removed from the legal title of the property.
For further information, Taxation Ruling TR 93/32 Income tax: rental property - division of net income or loss between co-owners provides guidance on the issues involved when the equitable interest does not follow the legal title.
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ended 30 June 20XX
Year ended 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
The Property has never been used for income producing purposes.
The legal title holders of the Property are Person A, Person B and Person C. Person D is not named as a legal title holder.
Person A and Person D initiated court proceedings to obtain a declaration that Person D is the equitable owner of the Property and for the Property's legal title to be transferred to them.
The court ordered Person A, Person B and Person C hold the property on trust for Person D.
The effect of the court order is that it establishes the beneficial owner of the Property as Person D and therefore as the beneficial owner any applicable capital gain tax is payable by them.
Person D made all repayments of the Property's loan and has paid for all expenses and outgoings of the Property since it was purchased. Person D has lived at the property since XXXX as his principal place of residence.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 102-20
Income Tax Assessment Act 1997 section 104-10