Private ruling: Capital gains tax - trust - main residence
Date of advice: 24 July 2015
Published: July 2014
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is any capital gain or capital loss made on the transfer of your legal interest in a property to your relative disregarded? | A1: Yes.


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

Reasons for decision: Summary: In order to determine whether you will be liable for capital gains tax (CGT) when the property was transferred solely into your relative's name we need to consider the ownership of the property. In some cases, an individual may hold legal ownership in a property for another individual in trust. A beneficial owner is a person or entity who is beneficially entitled to the income and proceeds from the asset. If the beneficial owner of a trust is absolutely entitled to a CGT asset as against a trustee, any act done by the trustee is treated as if it was carried out by the beneficiary. The core principle underpinning the concept of absolute entitlement is the ability of a beneficiary, who has a vested and indefeasible interest in the entire trust asset, to call for the asset to be transferred to them or to be transferred at their direction. A trust is a bare trust where the trustee has no interest in the trust assets other than that existing by reason of the office of trustee and the holding of the legal title, and who never has had active duties to perform or who has ceased to have those duties with the result that in either case the property awaits transfer to the beneficiary or at their direction In your situation, it is considered that you held the property in trust for your relative for the following reasons: • The only reason that your names were placed on the property's certificate of title was to satisfy the conditions stipulated by the financial institution. • You did not have any active duties to perform as trustee. • You and your child have provided statutory declarations that indicate that you merely held the property in trust for your child. As your child had a vested, indefeasible and absolute interest in the asset from the day it was purchased, they were always absolutely entitled to the asset as against you as the trustee and have always been the beneficial owner of the property. Therefore when the property was transferred to them there was no change in beneficial ownership and you will not be liable for CGT.

Relevant facts: Your child separated from their spouse and returned to Australia with their child. | Your child intended to reside briefly with you at your residence. | It was not practical for you all to reside at this dwelling and it was decided that your child would purchase their own house nearby. | Your child had an amount in savings to contribute towards the purchase. | Due to limited work history in Australia and the high cost of housing, lenders were not prepared to provide finance to purchase a suitable dwelling. | Your child approached you and requested that you purchase a dwelling in your names and they would contribute their savings to assist with the purchase. | You were able to obtain finance and purchased a dwelling in the 20XX income year. | Your child and their spouse commenced divorce proceedings. | The divorce proceedings were concluded in the 20XX income year. | Due to mounting legal costs, your child rented the dwelling and continued to reside with you. | Your child's financial position improved and as a result they and their child moved into the dwelling in 20XX. | Your child has obtained finance and title to the dwelling has been transferred to their name solely. | Your names were removed from the title. | You did not receive any consideration for the transfer. | The office of state revenue granted you an exemption from land tax. | You have provided statutory declarations signed by you and your child that indicate that you held the property in trust for your child. | The following documents forms part of and should be read in conjunction with this private ruling: