Private ruling: Legal v Beneficial Ownership
Date of advice: 20 November 2025
Published: 5 January 2026
Ruling period: July 20XX to June 20XX
Date scheme commenced: XX January 20XX

Ruling: Q1: Did a CGT Event A1 occur when you disposed of your interest in the Property? | A1: Yes.

Relevant facts and circumstances: In 20XX, your acquaintance, Person A sought to purchase a Property as their main residence. Person A did not have sufficient borrowing capacity to purchase the Property individually. You and your spouse agreed to become joint borrowers on the mortgage, and obtained a 1/3 interest each as joint owners of the Property. You have stated that this arrangement was to assist Person A to purchase the property. Person A paid all the mortgage repayments from the time the Property was purchased until the mortgage was paid off in 20XX. You remained on the Property's title as joint owner until 20XX where you transferred your interest in the Property to Person A for $X. You stated that you never received this money. You asserted that you did not intend to hold any pecuniary interest in the Property; and that you agreed to be a co-borrower on the mortgage to assist Person A in obtaining their residence. You have provided multiple documents to support that you did not intend to have any interest in the Property; including, but not limited to: • a file note which was stated to have been drafted by Person A, • bank documents such as the loan account to where payments were made • conveyancing documents including both the initial purchase and subsequent transfer of title • an accountant's opinion on whether you held interest in the property • a statutory declaration from Person A • your Will and the associated note to your Executor • a handwritten note

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 subsection 104-10(1) | Income Tax Assessment Act 1997 section 108-5 | Income Tax Assessment Act 1997 section 108-7 | Income Tax Assessment Act 1997 Division 115

Reasons for decision: Detailed Reasoning - Capital gains tax: Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) states that a capital gain or capital loss is made only if a CGT event happens to a CGT asset. An ownership interest in a property is a CGT asset under section 108-5 of the ITAA 1997. Section 108-7 of the ITAA 1997 treats individuals who own a CGT asset as joint tenants as if they each owned a separate CGT asset constituted by an equal interest in the asset and as if each of them held that interest as a tenant in common. Under subsection 104-10(1) of the ITAA 1997 CGT event A1 happens if you dispose of a CGT asset, however, subsection 104-10(2) of the ITAA 1997 provides that a disposal of a CGT asset does not occur if there is only a change of legal ownership and no change of beneficial ownership. It is recognised that an individual can be a legal owner of a property but have no beneficial ownership. In these circumstances, it is the individual who has beneficial ownership of a property who is subject to a CGT event upon sale. Under Division 115 of the ITAA 1997, the owner of a CGT asset may be eligible for a discount on the capital gain incurred on the disposal of the asset where relevant criteria are met, including holding the asset for longer than 12 months. | Detailed Reasoning - Legal v beneficial ownership: An entity's legal ownership of real property is the ownership interest which is stated on the property's legal title in accordance with the property law legislation in the State or Territory in which the property is situated. A beneficial owner is defined as a person or entity who is beneficially entitled to the asset. An individual can hold a legal ownership interest but have no beneficial ownership interest in an asset. Where the beneficial ownership and legal ownership of an asset are not the same, there must be evidence that the legal owner holds the property on trust for the beneficial owner. Taxation Ruling TR 93/32 Income tax: rental property - division of net income or loss between co-owners (TR 93/32) contains guidance on the issues involved where the equitable interest in a property may not follow the legal title. As stated in paragraph 41 of TR 93/32, the Commissioner considers that there are extremely limited circumstances where the legal and equitable interests are not the same and that there is sufficient evidence to establish that the equitable interest is different from the legal title. Although TR 93/32 deals primarily with rental property, the Commissioners view as stated in paragraph 41 applies broadly to all residences where there are multiple owners. | Detailed Reasoning - 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. For an express trust to be created it is necessary that there is certainty of the intention to create a trust, the trust's 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. In New South Whales, this is provided in paragraphs 23C(1)(b) and (c) of the Conveyancing Act 1919 (NSW) (Conveyancing Act): no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person's agent thereunto lawfully authorised in writing, or by will, or by operation of law. a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by the person's will. Subsection 23C(2) states the following exemption to this rule: This section does not affect the creation or operation of resulting, implied, or constructive trusts. Subsection 23C(2) of the Conveyancing Act consequently permits resulting, implied, or constructive trusts to be created without executing a written declaration of trust over real property. | Detailed Reasoning - Resulting or implied trusts: On the purchase of real property, a resulting trust may arise in situations where the legal title that vests in one or more of the parties does not reflect the respective contributions of the parties to the property's 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 56 ALR 483) ( Calverley ). A trust is presumed in favour of the party providing the purchase money. If an individual purchases and then pays for a property, but legal title is transferred to another person at their direction, the presumption of a resulting trust arises - the property is held in trust for them. 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 person's name. The presumption of a resulting trust can be rebutted by evidence of the parties' intentions at the time of purchase. | Detailed Reasoning - Capital gains implications: When determining whether legal ownership and beneficial ownership are different,, our starting point, as noted in TR 93/32 is that the beneficial ownership of the Property is the same as the legal ownership. The onus then lies with the taxpayer to rebut this conclusion through evidence to the contrary. In your circumstances, You and your spouse assisted Person A by purchasing the Property as co-borrowers and joint proprietors. You were all listed on the Property title and therefore, each of you held 1/3 of the Property in both legal and beneficial interest in accordance with TR 92/32. For the purposes of section 108-7 of the ITAA 1997, your legal ownership interest in the Property is treated as a separate CGT asset which is subject to a CGT event A1 when you dispose of it unless it can be demonstrated that the property was held on trust for Person A, that is, you had no intention to hold beneficial interest. | Detailed Reasoning - Did a resulting trust arise?: You stated that the purpose on going on the loan was to assist Person A in obtaining the Property as they did not have sufficient borrowing capacity to purchase the property outright by himself. As per the bank documents provided, you were co-borrowers for the total amount of the loan. As stated in Calverley by Gibbs CJ: Where one person alone has provided the purchase money it is her or his intention alone that has to be ascertained. In the present case however both purchasers contributed the purchase money. The amount... was provided equally by the parties, for it was lent to them jointly, on terms which made them jointly and severally liable for its repayment, and, having thus been borrowed, was applied by them in part payment of the purchase price. [emphasis added] Mason and Brennan JJ further expounded on the purchase price later in Calverley saying: The purchase price is what is paid in order to acquire the property; the mortgage instalments are paid to the lender from whom the money to pay some or all of the purchase price is borrowed. In this case, the [money] was borrowed from the mortgagee by the plaintiff and defendant jointly... Thus the plaintiff and defendant both contributed to the purchase price of the... property. In your circumstances, you and your spouse were co-borrowers of the loan along with Person A, giving you each a legal and beneficial ownership interest in the loaned sum of money, and equal responsibility for its repayment. As such, we consider that although you did not contribute to the purchase price through any direct monetary amounts (i.e., a deposit), you did contribute to the purchase price via the loan which you obtained jointly. Consequently, the presumption of a 'purchase money resulting trust' may arise to align your beneficial interest to the proportion you contributed to the Property's purchase price unless it is otherwise rebutted by evidence from the intentions of all parties involved. | Detailed Reasoning - Parties' intentions: As considered by Gageler J in Bosanac v Commissioner of Taxation (2022) 275 CLR 37 ( Bosanac ) at [64]: The presumption of a resulting trust is a presumption of fact, functionally akin to a civil onus of proof. The presumption will yield to an actual intention to the contrary found on the balance of probabilities as an inference drawn from the totality of the evidence. The weight to be given to the fact of a contribution having been made to the purchase price in drawing an inference as to actual intention will vary according to the totality of the circumstances of the case. Further, as stated by Gordan and Edelman JJ in Bosanac at [113] in: '... The objective intention of the parties is determined at the time when the trust was purportedly created - here, when the property in issue was purchased. Apart from admissions against interest, the only evidence relevant and admissible as to the parties' objective intention is their acts and declarations before or at the time of the transaction or "so immediately [thereafter] as to constitute a part of the transaction". Subsequent events and conduct are otherwise not admissible.' Where there is more than one party that contributed to the purchase price, the intention of all parties is material. ( Calverley v Green 56 ALR 483, at [251]). To rebut the presumption of a resulting trust, the advancer (i.e., you) must establish that the funds were not intended to give you an interest in the property but serve another purpose. Generally, this can be established by demonstrating that the funds were either intended to be a gift or loan to the other party or, that you held the property on trust for the other party. The Commissioner must determine your objective intentions by reviewing the evidence at, or so immediately thereafter, as to constitute part of the transaction. This requires the Commissioner to perform a fact-finding search on the evidence available to him. This evidence, however, is not limited to the time of the transaction where the admissions made are against the [advancing] parties interests. | Detailed Reasoning - Did you hold the property on trust for Person A?: We have considered the position you have primarily advanced, which is that you held the Property on trust for Person A, that is, you simply held Person As interest in the property until such a time they requested it to be transferred back to them. For the purposes of establishing an express trust, you must be able to provide such information as required to create certainty of the intention to create a trust, subject matter, and the object of the trust. You have provided 2 primary 'contemporaneous' documents (being the file note and a handwritten note) in which you assert that you never intended to have beneficial interest in the Property, it is in relation to these that we consider you advance that a trust was created between yourself and Person A at the time of the property was purchased. The file note you provided is claimed to have been written by Person A early January 20XX; it is both undated and unsigned except for one copy of the document you provided which included a timestamp of XX November 20XX which you stated was the time you received this document from Person A. The file note details observations by Person A regarding the Property, purchase price of the Property, and some general details around yourself and your spouse being co-borrowers on the Property's mortgage. The file note provides that you and your spouse would sign on as co-borrowers to assist Person A in meeting the lending requirements of the bank and that you would not take any pecuniary interest in the Property, merely being co-signatories. All expenditure associated with the property will be met by Person A. The file note also stipulates that you and your spouse will not benefit from any increase in the Property value and will make provisions in your will to cede the Property to Person A upon your passing or earlier when the bank loan is repaid. Although we consider this document provides some insight into your intentions, being that you went onto the loan to assist Person A, as the document is both undated and unsigned, the Commissioner cannot be satisfied that the document was written at the time of the transaction as it is equally plausible the document could have been written at a later timeframe beyond when the Property was purchased. Further, as you were jointly liable for the loan, the lack of particulars as to how the Property would be treated should Person A be unable to meet the mortgage repayments is a significant omission in the Commissioners view. Alternatively, you provided a handwritten note which included a date of XX December 20XX. The note provided extensive detail on the current situation of Person A, his family, yourself, and your spouse. The note details (amongst other things) that you were reluctant to go onto the [bank] loan and although wished to remain off it, subsequently agreed to go on the loan. The document was signed as 'endorsed' by yourself, your spouse, and Person A. The Commissioner is apprehensive to accept this document. It is observed that much of the language utilised within the document is different to that used within other documents provided. In particular, the term 'beneficial ownership' has not been used by you in any other documents, instead being characterised as 'pecuniary interest', and appears to have only been raised with you in 20XX via an advisory opinion and your tax agent's engagement in obtaining a private ruling. The level of detail in the handwritten note is also extensive, detailing the particular affairs of Person A, yourself, and your spouse, in what appears to be written in a letter format. Although this level of detail may be standard for the purpose of communicating long distances with another party, the fact Person A was residing in the Property (as per the letter) would therefore make this letter serve no purpose unless there was an ulterior motive not detailed in the letter. It is also curious the letter is 'endorsed' by all parties especially as according to the letter, both you and your spouse dated your signatures XX December 20XX, yet Person A's signature occurred on XX December 20XX even though they resided in the Property at the time the letter was written. The use of third person is used across the document and although primarily represents you and your spouse, is sometimes used to represent Person A and their family. The use of third person is unique in that it appears the letter is attempting to be something more than it is, such as a contract e.g., 'Spouse A and Spouse B have no intentions, plans or expectations of reward, payment of any kind, or beneficial interest. The house and land is theirs (Person A and family) alone after they alone pay off the mortgage, they understand and agree with these terms.' Lastly, we notice content within the letter is ambiguous. An example is the sentence in the above paragraph. We observe that the sentence specifically states 'the house and land is theirs alone after they pay off the mortgage'. This doesn't refute that you held interest in the Property, rather, that you held interest in the Property until such a time the loan had been repaid. We consider this consistent with other documents you provided in that you would retain an interest so to protect yourselves in the situation a tax liability arose or Person A was unable to pay the loan. While the Commissioner remains reluctant to accept that file note and handwritten note were created at the time of the Property's purchase, it is prudent to note that even if we accepted both the file note and handwritten note as contemporaneous evidence of the establishment of a trust, we observe that other documentation you have provided are at odds with you holding the Property on trust for Person A. These documents include: • Your Will, which demonstrates you hold a high degree of control indicative of a beneficial interest, specifically in that you do not simply direct the Property to go to Person A upon your passing (in accordance with the file note); but rather, direct your share of the Property to pass to Person As spouse and child(ren) where they do not survive. This direction is both at odds with the file note provided but also, exemplifies your degree of control in the Property, being able to direct your share of the Property via your estate. • The note to your Executor which states that you did not have a pecuniary interest unless a tax liability arises through either sale or transfer of ownership of the Property. In your response to our concerns raised around the note, you contended you did not have any beneficial interest and that this provision was made in the unlikely circumstance a tax liability arose. We disagree. The fact you made a provision for a tax liability displays you knowingly turned your mind to the fact that you may hold beneficial interest in the Property and the associated consequences of doing so. Separately, the fact that a tax liability has not yet arisen means that you could still attempt to exercise this interest against Person A where such a liability is imposed. • The transfer of your interest in the Property for $X, although a token amount, is at odds with holding the Property on trust for Person A. Where the Property was held on trust, you would be unable to benefit from any consideration for the Property as you would hold no interest in the Property, merely acting as trustee until Person A directed you to return the Property to them. Therefore, the Commissioner is not satisfied on the evidence provided that you intended to hold the Property on trust for Person A; but rather, held interest in the Property and ensured a degree of control to protect your interests in the circumstances Person A was unable to pay the loan or a tax liability arose for you. | Detailed Reasoning - Did you intend to gift to Person A?: You did not advance that you intended to gift your funds to Person A; however, we have considered your documentation to assess whether your contribution via the loan may be characterised as a gift. Generally, for something to be characterised as a gift, there must be: • a clear intent from the donor to give the gift to the recipient, • the gift must be delivered, • the gift must be accepted by the receiver, and • the transfer must be voluntary without consideration. It is observed that much of the documentation that deals with you being co-borrowers on the loan provides that you intended to assist Person A in obtaining the loan due to their inability to obtain finance on their own. These documents state that you did not intend to take any pecuniary interest in the Property. It may therefore be considered prima facie these documents demonstrate that as you did not intend to obtain any interest in the Property, you simply 'gifted' your share of the loan funds to Person A to purchase the Property. However, this is inconsistent with other documentation provided such as those considered earlier. Where a gift was intended, it would be inconsistent that you retained an interest in the Property irrespective as to whether a liability was imposed on you. As such, the fact that other documents clearly evidence that you retained an interest in the Property contradicts the notion that you intended the funds to be a gift. Therefore, the Commissioner is not satisfied on the evidence provided that you intended to gift your share of the funds to Person A to purchase the Property. | Detailed Reasoning - Did you intend to loan to Person A?: You did not advance that you intended to create a loan between yourself and Person A. We also observe that based on the documentation provided, there is no indication that you turned your mind to creating a loan between yourself and Person A. Therefore, we do not consider it necessary to determine whether you intended a loan between yourself and Person A as it is evidential this was not contemplated. | Detailed Reasoning - Conclusion: Based on the above, the Commissioner is therefore unsatisfied that you have demonstrated that the legal and beneficial ownership of the Property differ; and consequently, concludes that you held both beneficial and legal interest in the Property. Therefore, when you disposed of your interest in the Property by transferring it to Person A, a CGT event A1 occurred. You may be entitled to a 50% CGT discount under section Division 115 of the ITAA 1997 as you held your share of the Property for longer than 12 months, provided you meet the relevant criteria. We observe that if you can provide documentary evidence to confirm that Person A contributed a greater contribution to the purchase price of the Property than you (such as via a deposit), this may vary your beneficial ownership to align with the percentage of the purchase price you contributed for the purposes of calculating your CGT gain or loss.