Edited version of private advice

Authorisation Number: 1052390103818

Date of advice: 23 June 2025

Ruling

Subject: Legal versus beneficial ownership

Question

Can you disregard the Capital Gains Tax (CGT) A1 event that occurred under section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) when you transferred your legal ownership of the property?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

DDMMYYYY

Relevant facts and circumstances

On DDMMYYYY the property located at the property was purchased for $X. The property was registered in the name of Person A (you) and Person B (your child).

On DDMMYYYY the contract for the purchase of the property was settled using a mortgage and your contribution.

You were listed on the property title as the owner of an equal one-half share as tenant in common.

Your child arranged for a limited mortgage finance of $X.

You held joint liability over the mortgage.

You funded your contribution to the purchase price of the property with your personal savings.

Your child has occupied the property since the property was purchased.

In 20XX, you and your child entered into an oral agreement whereby your child would acquire your half interest in the property.

On DDMMYYYY the agreement was formalised in a deed of agreement (the deed).

The deed between you and your son states the following:

Person A has agreed to transfer her half share of the property to Person B and Person B has agreed to acquire Person A's half share in consideration of a payment of $X and releasing Person A from their joint liability in respect of the current mortgage debt over the property held by the bank (the consideration).

Person B shall arrange for and secure refinancing of the mortgage in their sole name and shall effect a payout of the mortgage so as to release Person A from their joint liability to the bank.

Person A and Person B have agreed that the whole of the consideration shall be payable in a lump sum on the agreed completion date whereupon Person B shall acquire Person A's share and then hold the title to the property in their sole name.

1. HISTORY OF PURCHASE OF THE PROPERTY

1.1.4 Person B requested Person A to lend them a further $X (the loan) so that they could make an offer to purchase that property.

1.2 Person A agreed to lend Person B $X on condition that:

1.2.1 their name would be shown on the title to the property as equal owner as tenant in common.

1.2.2 their reason for wanting to be shown as co-owner was to protect their loan against any claims against the property at some future time in the event that Person B entered into a de facto relationship and the relationship ended and the de facto made a financial claim against the property.

1.2.3 the loan would be repayable by Person B at the rate of $X per week by fortnightly payments.

1.2.4 no interest would be payable on the loan from Person A.

1.2.5 the loan could be repaid at any time by Person B.

1.2.6 when the loan was repaid to Person A they would transfer their one-half share to Person B, and

1.2.7 additionally when the loan was repaid to Person A by Person B, they would also contemporaneously discharge the joint mortgage with a new mortgage in their sole name.

2. THIS AGREEMENT

2.1 Transaction

The parties agree that Person A shall transfer their half share in the property to Person B and Person B shall acquire Person A's half share for the consideration of $X and discharge of the joint mortgage registered over the title to the property (the transaction).

2.2 The transaction herein shall be completed on a date agreed to between the parties on or before DDMMYYYY.

2.6 The parties intend this agreement to create a legally enforceable agreement between them.

4. CALCULATION OF TRANSFER CONSIDERATION

4.1 The parties acknowledge and agree that Person B sought and obtained from Person A a loan of $X to assist them to purchase the property (the loan).

4.2 The loan was secured by Person A acquiring a half interest in the property as tenant in common in equal shares.

4.3 The loan was to be repaid at the rate of $X per week payable fortnightly.

4.4 Person B was entitled to repay the loan in full at any time.

4.5 The loan was interest free.

4.6 On repayment of the loan in full to Person A they would transfer their half share in the property to Person B.

4.7 Person B has to date repaid to Person A a total of $X.

4.8 The amount outstanding under the loan as at DDMMYYYY is $X.

4.10 The transfer consideration is the outstanding loan plus the reimbursement which amount to $X, rounded off.

5. BANK MORTGAGE

5.1 The parties acknowledge and agree that Person B sought and obtained a mortgage loan from the bank in the amount of $X in the joint names of Person B and Person B which loan was to be secured by a mortgage registered over the title of the property.

5.2 The parties acknowledge and agree that although the bank loan was repayable jointly and severally by them that they made a personal agreement between themselves that Person B would make all the monthly repayments to the bank during the time that Person A held a half share in the property.

5.3 Person B has made all the bank loan repayments to-date and the amount outstanding under the loan as at DDMMYYYY is $X.

5.4 Person B has arranged refinancing in an amount sufficient to cover the bank loan balance, the amount to be paid to Person A and their costs and expenses in effecting the transfer from Person A.

7. WHOLE OF AGREEMENT

7.2 Person B acknowledges that the property has been solely occupied by them from the date of purchase and is currently occupied by them as their main residence.

7.4 Person A acknowledges that since the date of purchase they have not occupied the property as their main residence.

On DDMMYYYY you transferred your half share in the property to your child and were removed from the title.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 102-20

Income Tax Assessment Act 1997 section 104-10

Reasons for decision

Section 102-20 of the ITAA 1997 provides that a capital gain or capital loss results from a CGT event occurring. The most common CGT event, event A1, occurs under section 104-10 of the ITAA 1997 when there is a change in ownership of a CGT asset.

Accordingly, when applying the CGT provisions on the sale or legal transfer of property, you must consider ownership and determine if equitable ownership differs from legal ownership.

An individual can be a legal owner but have no beneficial ownership in an asset. This will ordinarily occur where the property is held on trust.

To establish occasions where legal and equitable ownership are not the same (i.e. a trust), there needs to be evidence to rebut the standard presumption that legal and equitable interests are the same.

This evidence ordinarily includes:

   • contemporaneous documentation that clearly shows the parties' intentions at the time the property was purchased, and

   • documentation that clearly shows that the parties treated the property in accordance with those intentions during the ownership period.

Gibbs CJ in Muschinski v. Dodds [1985] HCA 78 explained the relevance of contemporaneous evidence:

Where both transferees have contributed to the purchase money, the intentions of both are material, but where only one has provided the money, it is his or her intention alone that has to be ascertained. The evidence admissible to establish the intention of the real purchaser will comprise "the acts and declarations of the parties before or at the time of the purchase... or so immediately thereafter as to constitute a part of the transaction" (Charles Marshall Pty. Ltd. v. Grimsley [1956] HCA 28; (1956) 95 CLR 353, at p 365).

In the absence of clear and compelling evidence to the contrary, the property is owned by the people registered on the title.

Trusts may be of three kinds: express, constructive, or resulting.

Express trust

An express trust is one intentionally created by the owner of property to confer a benefit upon another. It is created by express declaration, which can be affected by some agreement or common intention held by the parties to the trust.

It is necessary that there is certainty of the intention to create a trust, subject matter, and the object of the trust.

While trusts can be created orally, all state property law Acts contain provisions that preclude the creation or transfer of interests in land except if evidenced in writing.

Constructive trusts

A constructive trust is a trust imposed by operation of law, regardless of the intentions of the parties concerned. It applies whenever equity considers it unconscionable for the party holding title to the property in question to deny the interest claimed by another. The existence of a constructive trust is dependent upon the order of the court.

Resulting or implied trusts

On the purchase of real property, a resulting trust may be presumed where the legal title that vests in one or more of the parties does not reflect the respective contributions of the parties to the purchase price.

A resulting trust arises by operation of law and falls into two broad categories. One such category is where someone purchases property in the name of another (Calverley v. Green [1984] HCA 81).

If a resulting trust arises, the party, or parties, who hold the legal title is, or are, presumed to hold the property upon resulting trust in favour of those who contributed to its purchase cost.

That is, the law presumes that the purchaser, as the person providing consideration for the purchase intended to retain the beneficial interest, although the legal interest is in the other's name.

The presumption of resulting trust may be rebutted by:

   • a presumption of advancement that arises and is not rebutted, or

   • evidence of the contributors' common intention at the time of the property purchase contrary to the resulting trust arising (Calverley v. Green [1984] HCA 81).

Presumption of advancement

The presumption of advancement is an equitable principle where a person puts property in the name of another person with whom they have a close familial relationship. The presumption only applies to transfers and purchases made by people who stand in particular relationships, including parents and their children.

Under the presumption of advancement, the property is transferred with the intention of transferring both the beneficial interest in the property as well as the legal title. The parties hold their equitable interests in the property in the same proportions as their legal interests.

In Calverley v. Green [1984] HCA 81 it outlines the following principles:

   • Where one person purchases property in the name of another, or in the name of himself and another jointly, it will be presumed that the first person did not intend the other to acquire a beneficial interest unless there is such a relationship between the persons as gives rise to a presumption of advancement.

   • The presumption of advancement may be rebutted by evidence of the actual intention of the purchaser at the time of purchase. If two persons have contributed to the purchase and the legal interest does not reflect the proportions of their contributions, the intentions of both parties at the time of purchase are important.

   • The onus of rebutting the presumption of advancement lies with the person who is considered as having gifted the property to another (usually the purchaser). Evidence is required that demonstrates that the purchaser did not intend the property to be a gift to the other party.

Application to your circumstances

The Commissioner considers that there are extremely limited circumstances where the legal and equitable interests differ and requires sufficient evidence to establish that the equitable interest is different from the legal title.

In your case, there is no constructive trust as there has been no court or tribunal hearing which determined a constructive trust is in existence.

For the other types of trust, clear contemporaneous evidence is required to either establish that there was an express trust or to rebut a resulting trust or the presumption of advancement.

You stated that you entered into a verbal agreement with your child during 20XX to assist them to purchase a property as their first home by providing an interest free loan and your child was required to make loan repayments to you until the loan was repaid or some earlier date when your child was able to repay the loan in full. You stated that there was no intention at the time of purchase that you would benefit from any future sale of the property.

You have not provided any contemporaneous written evidence or documentation of your intention, dated prior to or at the time the property was purchased to support the argument that the beneficial ownership lies solely with your child.

You stated you haven't resided in the property during your ownership period. We accept that you have not directly benefited through your own immediate use and enjoyment of the property, instead you have exercised your ownership rights by providing your child with continued use and enjoyment of the property and in protecting your contribution to the purchase.

You have provided evidence of a Deed of Agreement between you and your child created several years after the property was purchased. This is not contemporaneous evidence of your intentions at the time of purchase. The transfer of your half share in the property to your child was conditional on your contribution to the purchase price being repaid, and upon a payment of $X in consideration. This is inconsistent with the proposition that your child had always been the beneficial owner and the transfer was merely a change in legal ownership.

You state in the Deed that you agreed to lend your child $X on condition that:

   • Your name would be shown on the title to the property as equal owner as tenant in common,

   • The loan would be repayable by your child to you at the rate of $X per week by fortnightly payments,

   • No interest would be payable on the loan,

   • The loan could be repaid at any time,

   • When the loan was repaid to you, you would transfer your one-half share to your child, and

   • Your child would contemporaneously discharge the joint mortgage with a new mortgage in their sole name.

You state the reason for wanting to be shown as co-owner was to protect your loan against any claims against the property if at some future time your child entered a de facto relationship and the relationship ended and the de facto made a financial claim against the property.

This demonstrates that you intended to protect your half share in the property in the event ownership of the property or entitlement to the proceeds on disposal were brought into question. This indicates intention and control indicative of an ownership interest.

The documents you provided indicate legal and equitable interest were the same.

The presumption of advancement may apply in certain familial relationships (e.g., parent to child) in circumstances where the ownership interest is not the same as the contribution to purchase price, and a resulting trust would otherwise exist.

You contributed a total of $X towards the purchase price: $X from your own monies and $X by being X% borrower for the $X loan. Under the presumption of a resulting trust, your equitable interest in the property would be X% in accordance with your contribution to the property's purchase price.

Although your contribution was more than X% of the purchase price, the presumption of advancement applies to your relationship with your child. Under the presumption of advancement as illustrated in Bosanac v Commissioner of Taxation [2022] HCA 34, the resulting trust which is formed in accordance with your contribution to the purchase price is rebutted in favour of the proportion of legal ownership interests in the property. Therefore, it is presumed you intended the ownership to be held in two shares of X%.

We consider that you have insufficient evidence to establish that the equitable interests in the property were different from the legal title.

Consequently, CGT the A1 event that occurred in relation to the transfer of your share in the property cannot be disregarded.