Private ruling: Capital gains tax
Date of advice: 22 May 2018
Published: July 2018
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will you make a capital gain (or loss) when the property is sold? | A1: No.

Relevant facts and circumstances: You were added as a purchaser on a contract of sale for your relatives to purchase a property. I have never lived in the property. You have never contributed any money towards repayments on the mortgage nor offered any financial assistance. You have never paid any money towards rates or maintenance of the property. You have never received any rent or income from the property. The only reason you were added as a purchaser on the contract was to assist in getting the finance approved.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 120-20

Reasons for decision: Summary: Under section 120-20 of the Income Tax Assessment Act 1997 (ITAA 1997), an entity will make a capital gain or a capital loss if a capital gains tax (CGT) event happens to a CGT asset. CGT event A1 occurs when you dispose of a CGT asset. You are considered to have disposed of a CGT asset if a change of ownership occurs from you to another entity because of some act or event or by operation of law. The capital gain or capital loss is made at the time of the event (section 104-10 of the ITAA 1997). | Detailed Reasoning - Beneficial ownership: 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 some cases, an entity may hold a legal ownership interest in property for another individual in trust. In this case, we accept that you were not the beneficial owner of the property. Your relatives have lived in the property and used it as their main residence. Your relatives are the beneficial owners of the property. Therefore, when the property is sold your relatives will be treated as having sold the property rather than you. Therefore, your relatives will be liable for any CGT liability which may arise as a result of the disposal of the property. Consequently, you will not make a capital gain (or loss) when the property is sold.