Private ruling: CGT
Published: June 2015
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Did a capital gains tax (CGT) event occur when the legal interest held in your name in the property was transferred to your relative? | A1: No.

Relevant facts and circumstances: Due to relatives passing away intestate, you inherited an interest in a property. The property has always been the home of your relative who inherited the other interest in the property. It has never been your intention to receive any money for your legal share of the property as there was an understanding between you and your relative that the property was their family home and that you did not have an ownership interest. You have never paid any expenses or received any rent in relation to the property. You transferred your legal interest in the property to your relative for no consideration.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10

Reasons for decision: Summary: CGT is the tax you pay when a CGT event happens to a CGT asset, such as a dwelling. The most common CGT event (CGT event A1) occurs when you dispose of a CGT asset to another entity. A CGT asset owned by a deceased person at the time of their death passes to a beneficiary of the deceased's estate if the beneficiary becomes the owner of the asset under the will or due to the law of intestacy. Generally any capital gain or loss made when the asset passes to a beneficiary of the deceased estate is disregarded. However, the beneficiary will be the relevant taxpayer if a CGT event happens to the asset after it has passed to the beneficiary. When considering the disposal of a property, the most important element in the application of the CGT provisions is ownership. Both legal and beneficial ownership must be determined. Unless it can be proved otherwise, property is considered to be legally owned by the person(s) registered on the title, but it is possible for beneficial ownership to differ from legal ownership. In such cases, a trust relationship exists with the legal owner holding the property on trust for the beneficial owner. Where beneficial ownership and legal ownership of an asset are not the same, there must be evidence to demonstrate that the legal owner holds the property on trust for the beneficial owner. In your case, you state that there was an understanding that you had no ownership interest in the property, that is, your relative was the only owner of the property. This means that you contend that you have always held the property in trust for your relative. Your assertion is supported by the fact that you have never paid any expenses in relation to the property or received any rent from your relative for your share of the legal ownership of the property. It is also supported by the fact that you have now transferred your share of the legal title to your relative for no consideration. It is accepted that you were holding your share of the legal title of the property in trust and it is considered that a CGT event A1 did not occur when your share of the legal title was transferred to your sibling.