Private ruling: Property ownership interest
Published: November 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Questions and answers | 1. Does the Commissioner accept that you have the full ownership interest in dwelling B? | Yes. | 2. Does the Commissioner accept that you did not have an ownership interest in dwelling A? | Yes.

Relevant facts and circumstances: You acquired a property with your spouse and other people. The property contained a dwelling at the front and room to subdivide and construct another dwelling at the rear. The initial agreement was that you would pay a sum of money towards the purchase of the property in exchange for one of the other parties constructing a dwelling for you at the rear of the property. At the time the property was acquired, it was the intention of all parties that: • the dwelling to be constructed at the rear of the property would be your main residence; • the other couple would take the front dwelling and use as their main residence; • following completion of the rear dwelling, the property would be subdivided so that the front and rear dwellings would be on separate titles under the separate ownership of the respective couples; and • the future subdivision and ownership of the front and rear portions of the property were to be recorded on the title as allowed under the property law of your state. Despite your intentions, the transfer of title was inadvertently registered in all your names without any mention of the future subdivision. Your marriage subsequently ended. Your spouse relinquished their interest in the property, leaving you and the other couple as the registered owners on the title. Again, the proposed subdivision was not recorded on the title. You and the other parties made a written agreement which included a reference to the original agreement being made. Amongst other things, the agreement also stated that the property would be subdivided and the ownership of the rear block would be signed over to you. After construction of the rear dwelling had been completed, you and the other parties were ready to finalise the subdivision by registering the rear portion to you and the front portion to the other parties. You were financially unable to complete the subdivision in separate names due to the amount of stamp duty involved so two new titles were created with the existing owners on each title. You occupied the rear dwelling which was known as dwelling B and the other parties occupied the front dwelling which was known as dwelling A. You and the other parties remained living in your respective dwellings until the others sold dwelling A and retained all proceeds. You commenced renting out dwelling B and have been collecting all rent monies and incurring all expenses.

Relevant legislative provisions: Income Tax Assessment Act 1997 Part 3-1

Reasons for decision: Summary: You acquired a property under contract with three others and the title was registered in all four names. Although the property title legislation in your state of residence allowed you to record the future subdivision of the property on the title at the time of registration, this was not completed. Nor was it completed after you and your spouse separated. Further, on the actual subdivision, separate legal ownership of the respective lots was not completed even though that was the desired outcome of the parties involved. You occupied dwelling B as your main residence until you commenced renting it out. The other parties occupied dwelling A as their main residence until it was eventually sold. Because of the above, you argue that you should be entitled to the entire ownership interest in the rear block with the legal ownership interest of the other parties being ignored. In turn, the other parties should be entitled to the entire ownership interest in the front block with your legal ownership interest being ignored. Although you did not register your respective interests on the original title or subdivided titles, you have provided a copy of a written agreement which supports the stated intention of the parties at the time the property was originally acquired. Further, it would be generally expected that a written agreement of this type would have held significant weight in the courts should there have been a dispute between the respective parties. Based on the information and evidence you have provided, the Commissioner accepts that you have the full ownership interest in dwelling B and had no ownership interest in dwelling A.