Private ruling: CGT - legal vs beneficial ownership
Date of advice: 5 April 2023
Published: 29 May 2023
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Did a capital gains tax (CGT) event happen when you transferred your ownership interest in the property to your child? | A1: No. Having considered your circumstances and the relevant factors relating to your situation, the Commissioner accepts that although you were the legal owner of the property, it was never intended for you to have any beneficial ownership of the property. Therefore, you will not have a CGT event A1 or any other CGT event occurring when your legal ownership ends.

Relevant facts and circumstances: At some time after 1985, your child separated from their spouse and sold their marital home. Your child used the profit from the sale of this property to pay the deposit for the purchase of the property. Upon legal advice from your child's solicitor, you agreed to a joint legal ownership arrangement whereby you owned 70% and your child owned 30% of the property. This was to safeguard against any future claims from your child's ex-spouse. At the time this occurred all parties agreed that financial responsibility for the property and any subsequent gain from the property would solely sit with your child. You did not contribute financially to the purchase of the property, maintain the property of contribute to any of the mortgage payments. Your child used the property as their main residence for several years. Later, your child moved out to their new partner's house and put the property on the rental market. Your child received all rental income and reported the income in their tax return. Later, you transferred your ownership interest in the property to your child, who entered into a new mortgage solely in their name.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 104-10