Edited version of private advice

Authorisation Number: 1052213517758

Date of advice: 23 January 2024

Ruling

Subject: Legal and beneficial ownership

Question

Will a capital gains tax (CGT) event A1 occur upon the disposal of your ownership interest in the property when the title is transferred?

Answer

No.

CGT event A1 occurs when there is a disposal of an ownership interest in a CGT asset. However, CGT event A1 does not occur if there is only a change of legal ownership and not a change of beneficial ownership.

You became the registered legal owner of the property when it was purchased, but without any expectation of having any elements of beneficial ownership. Although the property was purchased in your name, there was no intention for you to benefit from the property.

When a person purchases and pays for a property, but legal title is placed in another person's name, a resulting trust will arise in favour of the contributor of the purchase money.

Based on the facts, the Commissioner accepts that in your circumstances, although you were the legal owner of the property, it was never intended that you would have any beneficial ownership. It can be reasonably concluded that at the time the legal ownership of the property is changed, that is, when the legal title of the property is transferred from your name to your parent's name, you will not have a CGT event A1 or any other CGT event occurring when your legal ownership ends.

Therefore, as you are not considered to be the beneficial owner of the property, CGT event A1 will not occur to you when the title of the property is transferred.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

On XX/XX/20XX, the property was purchased in your name.

Prior to the acquisition of the property, your parent was going through a divorce process and needed a home.

You and your parent agreed that the property would be purchased in your name so that there would be no issues surrounding assets or any disputes during the divorce process.

Although the title of the property was in your name, you and your parent verbally agreed that your parent would be solely responsible for the purchase of the property and the associated holding costs.

You were eligible for a grant which was automatically offset against the purchase of the property. Aside from this, you did not use any of your own funds to purchase the property.

Your parent has lived in the property and treated it as their main residence since the acquisition date.

Since the property was acquired, your parent has exclusively paid for all running costs including council rates, utility rates, major repairs and maintenance work, insurances either directly or via automatic deductions from a payment they received from Organisation A.

Your parent has also paid for all major structural repairs and improvements to the property including plumbing works, installation of roller blinds and air conditioning units.

In 20XX, the property was destroyed by fire. Your parent took legal action against the property insurer and builders due to payment disputes.

You have not paid for any ongoing costs of the property, nor have you resided in the property or treated it as your main residence at any time.

You have not received rent, bond or other payments from your parent or otherwise derived any financial gain from the property.

When the property is disposed of, it has been assumed by both you and your parent that your parent will receive the full proceeds of the sale.

The title of the property was never transferred to your parent as there was a mutual understanding that your parent owned and maintained the property.

Recently, your parent has undergone estate planning and would like the title of the property to be transferred into their name. Both you and your parent have agreed that the legal ownership of the property will be transferred from yourself to your parent prior XX/XX/20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997Section 102-20

Income Tax Assessment Act 1997 Section 104-10

Income Tax Assessment Act 1997 Section 106-50

Income Tax Assessment Act 1997 Section 118-110