Edited version of private advice

Authorisation Number: 1052248964276

Date of advice: 10 May 2024

Ruling

Subject: CGT - legal v beneficial ownership

Question

Did a capital gains tax event A1 happen to you when the Property was sold?

Answer

No.

Capital gains tax (CGT) event A1 occurs when there is a change in ownership of a CGT asset under section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997). However, CGT event A1 does not occur if there is only a change of legal ownership and not a change of beneficial ownership.

Having considered your circumstances and the relevant factors relating to your situation, the Commissioner accepts that although you had a legal ownership interest in the Property, it was never intended for you to have any beneficial ownership of the Property.

Therefore, CGT event A1 nor any other CGT event happened to you when your legal ownership ended when the Property was sold.

This ruling applies for the following period:

Income year ending 30 June 20XX.

The scheme commenced on:

1 July 20XX.

Relevant facts and circumstances

You are a citizen of Country X who has never lived or worked in Australia.

You are married to Person A who moved from Australia to Country X more than XX years ago.

Person A's relative (Person B) was looking to purchase a property in Australia but had been advised that they would be unable to obtain a loan given their personal situation.

It was suggested to Person B that having a family member listed on the loan would make the loan approval process easier.

You and Person A agreed to assist Person B in relation to her obtaining a loan and your involvement was for the purpose of enhancing Person B's loan application.

Person B purchased a vacant block of land (the Property).

A loan was obtained to purchase the Property (the Loan), with the lending bank requiring your and Person A's names to appear on the title of the Property recorded as follows:

•         Majority interest - Person B; and

•         Smaller interest - You, Person A and Person B.

A house was constructed on the Property and in the same year Person B and their family moved into the new house after construction was completed.

Neither you nor Person A made any contributions in relation to the Property as follows:

•         Costs associated with the purchase of the Property, such as deposit, conveyancing costs and/or stamp duty

•         Costs associated with the Loan, such as repayment amounts or interest arising in relation to the Loan

•         Costs associated with the construction of the house on the Property

•         Costs arising in relation to the Property, such as council rates, insurance, utility bills, repairs and/or maintenance, any improvements; or

•         Costs associated with the sale of the Property.

The Property was not used for rental purposes from the time the Property was purchased until it was sold, with Person B living there during that period.

Neither you nor Person A:

•         Used the Property; or

•         Will receive any of the sale proceeds from the sale of the Property, which will be used by Person B to purchase another property.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 102-20

Income Tax Assessment Act 1997 Section 104-10

Income Tax Assessment Act 1997 Section 106-50

Income Tax Assessment Act 1997 Section 108-5

Income Tax Assessment Act 1997 Subdivision 104-B