Private ruling: Capital gains tax
Published: June 2014
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Will a capital gains tax (CGT) event occur when individual A transfers their X% in the property to individual B? | A1: No.

Relevant facts and circumstances: The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are: • the application for private ruling, and • the documents provided with the application or private ruling. After 20 September 1985, individual B and their spouse purchased a property to use as their main residence. During the 200X financial year, individual B made a legal transfer of their X% interest in the property to individual A to hold as trustee. Individual A does not live in the property. A deed was prepared and signed at the time stating that individual A holds the property as trustee only for individual B and shall not dispose of the X% interest without obtaining consent. At this point in time there was no change to the beneficial ownership of the property. As the legal reasons for the property transfer no longer exists, individual B is considering documenting a transfer of the property back to them in their own right. A deed will be prepared to remove individual A as the trustee over the X% interest in the property.


Reasons for decision: Summary: A taxpayer will have a capital gain only if a CGT event happens. Section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) specifies that CGT event A1 happens if a taxpayer disposes of a CGT asset. 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 capital gains tax (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. | Detailed Reasoning - Application to your circumstances: In this case, the property was originally acquired by individual B after 20 September 1985.Their interest in the property was transferred to individual A. A Deed was prepared at the time which detailed that individual A was to hold the property on trust solely for individual B. Given there is contemporaneous evidence, we accept that individual A was holding the property on trust for individual B. When the property is transferred from individual A to individual B there will be no change in beneficial ownership. Therefore, a CGT event will not occur at this time.