Private ruling: Capital gains tax
Date of advice: 17 May 2019
Published: July 2019
Ruling period: Year ending 30 June 2019 | Year ending 30 June 2020
Date scheme commenced: 1 July 2018

Ruling: Q1: Do you have an ownership interest in relation to the Property X for capital gains tax purposes? | A1: No. Having considered your circumstances and the relevant factors, you do not have an ownership interest in the property for capital gains tax purposes. Your parent’s funds were used to buy Property X which was solely for their benefit, becoming their main residence. This created a bare trust with your parent as the trust’s sole beneficiary. This trust and you are two separate and distinct ‘entities’ for taxation purposes. However, the capital gains provisions treat your parent as the owner of the Property X because your parent is the sole beneficiary and therefore the absolutely entitled beneficiary to it. As you do not have an ownership interest in the Property X, any capital gain made on its sale does not need to be included in your income tax return. Further information about capital gains tax can be found by searching ‘QC 22147' on ato.gov.au

Relevant facts and circumstances: Your parent moved from overseas to Australia in 20XX to live near you and your spouse. Your parent wanted to purchase a home and live independently from you, but close enough so you could look out for them. You found a property your parent liked that was just being completed (Property X). Your solicitor advised that as your parent was not yet a permanent resident of Australia, they were prevented from purchasing a property in Australia. It was decided that you and your spouse should purchase the home in your names. Your parent said that when they passed away the house would be yours anyway. Your parent’s funds were used to purchase the property. Your parent moved in to the property and lived in it as their main residence. Your spouse completed some landscaping for your parent, which they paid for. You continued to provide support to your parent so they could live independently. Your parent was granted permanent residency in 20XX. You made enquiries then about how you could transfer the title for the property to them, but were told if you did that there would be stamp duty payable. Your parent said that it really didn’t matter if their name was on the title because when they died the house would be yours. You didn’t transfer the title into their name. In early 20XX your parent’s health deteriorated. They experienced falls and could no longer work basic household appliances. Your parent refused to move into a home so in 20XX you moved in with them to ensure your parent took their medication, had help if they fell and the house remained appropriately heated. In February 20XX your spouse had a fall in the driveway of your home (Property Y), which left them with a medical condition and they required hospitalisation. You were now looking after both households, your parent and visiting your spouse in hospital. Your spouse needed to go to a nursing home as you were not home to look after them. A Guardian was appointed for your parent. The Public Trustee was appointed as the administrator of your parent’s estate. The Public Trustee placed a caveat over the certificate of title for Property X claiming your parent had an equitable interest by virtue of a constructive trust/and or resulting trust when their funds were used to purchase the property. Towards the end of 20XX your parent was placed in a home by the Guardian. You cleaned out the Property X as they would not be returning, and then moved back to the Property Y. You brought your parent out of the nursing home to live with you there, as Property Y more suitable if all three of you were going to be living there together. Your spouse remained at the nursing home but did spend nearly every afternoon with you at Property Y. The insurance was due to be paid on Property X however the insurer advised they did not want to insure it if it was unoccupied. Property X was rented out towards the end of 20XX. The rental income is used to pay for your parent’s living expenses. On instruction from the Public Trustee, you lodged an income tax return for your parent for the year ended 30 June 20XX. It included the rental income from Property X. Your spouse has now returned to live with you and your parent at Property Y. You plan to move yourself, your parent and your spouse to another state to be nearer to your child and their family to ensure you have some support. You will sell both Property X and Property Y to fund the purchase of one home near your child and their family.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 106-50 | Income Tax Assessment Act 1997 Section 118-130 | Income Tax Assessment Act 1997 Section 960-100