Private ruling: CGT - beneficial ownership
Date of advice: 20 June 2017
Published: October 2017
Ruling period: Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2016

Ruling: Q1: Will the transfer of the title of the property into your name trigger a capital gains tax (CGT) event? | A1: No

Relevant facts and circumstances: You purchased land (the property) after 20 September 1985 and built a home in which to live. The property’s title was placed in the name of a family member. You did not tell the family member this had been done and you were under the belief that you would remain the legal owner of the property until your death. The family member was advised that their name was on the title of the property in 20XX when you were making arrangements to sell the property and discovered that they were listed as the owner on the title. All funds to acquire the land, build the house, pay rates and other maintenance and repair costs were paid by you. The property has been your main residence since acquisition. Until 20XX, the family member was not aware that the property’s title was in their name. The family member intends to transfer the title of the property into your name.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 104-10(2)

Reasons for decision: Summary: The CGT provisions apply when you dispose of an asset acquired on or after 20 September 1985. However, subsection 104-10(2) of the Income Tax Assessment Act 1997 (ITAA 1997) states that a change in the legal ownership of an asset without a change in the beneficial ownership will not constitute a disposal for CGT purposes. A beneficial owner is defined in Taxation Ruling IT 2486 and Taxation Determination TD 92/106. A beneficial owner is the person or entity who is beneficially entitled to the income and proceeds from the asset. A legal owner is the individual who has their name on the legal documents associated with the CGT asset, an example would be the title deed for a property. An individual can be a legal owner but have no beneficial ownership in an asset. It is the beneficial owner of a CGT asset that is liable for capital gains tax upon sale of the assets. In your case, we accept that you have maintained the beneficial ownership of the property from the time of acquisition. Although the family member has legal ownership, you are still the beneficial owner. As beneficial ownership has not changed it is determined that no disposal will occur for capital gains tax purposes when the family member transfers the property title into your name. Therefore, no CGT event will occur at the time of the transfer.