Private ruling: Legal v equitable ownership
Date of advice: 1 August 2025
Published: 29 September 2025
Ruling period: Year ending 30 June 20YY
Date scheme commenced: DD March 20YY

Ruling: Q1: Did a CGT Event A1 occur when you transferred legal interest in the property to your child and their partner? | A1: Yes.

Relevant facts and circumstances: You, your spouse, and your child acquired the Property as joint proprietors. The Property was purchased by contract of sale dated XX March 20XX, with settlement on XX June 20XX. The Property was purchased as the main residence for your child. At the time of purchase, your child had recently commenced their own business, which had been trading for less than X years. Your child also already had an existing loan obligation on their previous residence (later, their investment property), which they had acquired in their own name in 20XX. The bank was unwilling to lend funds to your child for the purchase of the Property over concerns of their ability to service the mortgage repayments independently. You provided correspondence between your child and the bank which shows that they initially tried to obtain the property on their own, but the bank advised they may need to add your details to the loan. You and your spouse agreed to be co-borrowers on the loan. The bank required that both you and your spouse's name be on the loan and title of the Property. You provided bank statements that show your child redrawing an amount to be used for the home loan deposit. You stated that you and your spouse have not contributed financially to the Property since acquisition. Your child and their partner have lived in the property since acquisition and: • Made all mortgage repayments with their personal earnings • Partly renovated the property shortly after acquisition through use of their own funds • Maintain the property including all associated expenses such as council rates, water charges, utilities, and insurance. You provided supporting documentation which demonstrates the above. In 20XX, your child and their partner wanted to refinance the Property to enable them to renovate the house and undertake structural repairs due to water damage. In order to obtain a joint loan, the title of the Property needed to be transferred into the names of your child and their partner. You and your spouse transferred your respective one-third ownership in the property to your child and their partner. You and your spouse received no proceeds for transferring the legal titles to your child and their partner. All costs associated with the transfer were paid by your child and their partner. You provided an email from the bank dated XX June 20XX which stated that the arrangement you and your spouse entered was not a guarantor arrangement as your income was used to service the loan. You therefore had equal responsibility to repay the loan.

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. A property is a CGT asset under section 108-5 of the ITAA 1997. Under subsection 104-10(1) of the ITAA 1997 CGT event A1 happens if you dispose of a CGT asset, however, subsection 104-10(1) 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 equitable ownership. 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. It is recognised that an individual can be a legal owner of a property but have no equitable ownership. In these circumstances, it is the individual who has equitable ownership of a property who is subject to a CGT event upon sale. Under Division 115 of the ITAA 1997, an entity may be eligible for a discount on CGT assets where they meet the relevant criteria, including holding the asset for longer than 12 months. | Detailed Reasoning - Legal v equitable ownership: Legal interest in a property is determined by the legal title to the property under the property law legislation in the state or territory in which the property is situated. It is possible for legal ownership of property to differ from equitable ownership. An equitable owner is defined as a person or entity who is beneficially entitled to the asset. An individual can be a legal owner but have no equitable ownership in an asset. Where the equitable 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 equitable owner. To establish occasions where legal and beneficial 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 stated in Muschinski v. Dodds [1985] HCA 78 that the relevant principles included there being 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 365) In relation to evidence of a trust arrangement, the following should also be noted: • contemporaneous evidence includes any documents such as emails, diary entries, bank documents, correspondence with third parties involved in the transaction, etc., that were created at the time of the property's purchase, • where there is little or no contemporaneous evidence of intention and the terms of an arrangement, formal documents prepared many years after a property was purchased will be of little probative value, and • the evidence must be unambiguous. In the absence of clear and compelling evidence to the contrary, the property is considered to be owned by the people registered on the title. 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. We will assume where taxpayers are related, e.g., husband and wife, that the equitable right is exactly the same as the legal title. | Detailed Reasoning - Resulting 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 equitable 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. However, there are instances where this application may not apply. This is where the property is transferred to the purchaser's immediate family such as a spouse or a child. In such circumstances, the presumption of a resulting trust is replaced by the 'presumption of advancement'. The rebuttable presumption of advancement deems the purchaser to have prima facie intended to advance the interests of the family members (i.e. an absolute gift). | Detailed Reasoning - 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 equitable 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) 155 CLR 242 (Calverley), Gibb CJ, found four important principals in relation to the presumption of advancement: • Where one party purchases property in the name of the other, it will be presumed that the first party did not intend the other to take an equitable interest unless there is such a relationship between the parties as gives rise to a presumption of advancement. • The sort of relationship where the presumption will arise is where the relationship is such that it is more probably than not that an equitable interest was intended to be conferred. • The presumption of advancement may be rebutted by evidence of the actual intention of the purchaser at the time of the purchase. If two parties have contributed to the purchase 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 on rebutting the presumption of advancement lies with the party who is considered as having gifted the property another (usually the purchaser). Evidence is required that demonstrates that the purchaser did not intend the property to be gifted to the other party. • In Commissioner of Taxation v Bosanac (No 7) the argument of a result trust versus the presumption of advancement was discussed at length. The court outlined the following principles: • Although it is inferred to as a presumption of advancement, the dominant approach in Australia is that it is strictly not a presumption. • Rather it is a description of certain circumstances, being the existence of particular relationships, where the presumption of a resulting trust does not arise. • Generally, the court will look to the dealings, documents and communications at the time of the purchase to determine whether there was intention to retain an equitable interest. However, evidence of the dealings between the parties after the time of purchase may be a relevant factor. | Detailed Reasoning - Capital Gains implications: When determining legal v equitable ownership, our starting point, as noted in TR 93/32 is that the equitable 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. You and your spouse purchased the Property with your child as 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 equitable interest in accordance with TR 92/32. For the purposes of section 108-7 of the ITAA, your interest in the Property is treated as a separate CGT asset which is subject to a CGT A1 event unless it can be demonstrated that the property was held on trust for your child by you or, the presumption of advancement applies. | Detailed Reasoning - Did you hold the property on trust?: To determine if you have an equitable interest in the property, the facts and circumstances surrounding the Property's purchase are considered in light of your relationship with your child. You provided documentation which included a conversation between the bank and your child with the bank asking your child to fill out the application form and where needed, add your details. The contract of sale shows your child's name typed whereas you and your spouse's names were added in handwriting, signifying a change to the contract. This indicates it was your child's intention to purchase the Property in their own name. Your child already had an existing loan obligation on their previous residence, and it appears for this reason, the bank was unwilling to lend funds to your child over concerns of their ability to service the mortgage repayments independently. Your assistance with the loan and named on the Property title does not indicate that your legal interest was held on trust for your child. As co-borrowers of the loan, you and your spouse are equally responsible for its repayment along with your child. 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. Consequently, the presumption of a 'purchase money resulting trust' arises to bestow an equitable interest on you for the proportion you contributed via the purchase price unless it is otherwise rebutted by evidence from the intentions of all parties involved. Although we understand you may not have desired to obtain an equitable interest in the Property, you have not provided any contemporaneous evidence to demonstrate the extent of the arrangement regarding you becoming a co-borrower with your child and how this arrangement was intended to operate. We further note that although you provided documentation that showed your child intended to obtain the Property without your assistance, this does not provide evidence as to your intentions and merely demonstrates that your child could not obtain the loan on their own and required assistance to meet the banks requirements. The loan was provided to you, your spouse and your child to acquire the Property and you were all named as legal owners on the title. You, your spouse and your child all had a responsibility to ensure the loan was repaid, regardless of any private agreement you and your spouse came to with your child regarding the loan repayment. Your child's contribution towards repaying the mortgage, undertaking renovations at their own expense and paying utility costs occurred after the loan was granted and the Property purchased and are not considered to be a contribution to the original purchase price. | Detailed Reasoning - Conclusion:: We therefore conclude that you held legal and equitable ownership for 1/3 of the Property and consequently, upon transferring legal ownership of the property to your child and their partner on DD MM 20YY, 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 longer than 12 months, provided you meet the relevant criteria. It is recognised that as your child provided a deposit amount at the time of purchasing the Property, we consider they may hold a greater interest in the Property for the deposit amount they contributed and therefore, for the purposes of calculating your CGT gain or loss, will reduce the percentage of share held by you in the Property.