Private ruling: Capital gains tax - deceased estate - 2 year discretion
Date of advice: 1 July 2016
Published: August 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Is any capital gain or capital loss you make on the sale of the dwelling ‘A’ disregarded? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20 | Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 106-50

Reasons for decision: Summary: In order to determine whether you will be liable for capital gains tax (CGT) when the property was sold we need to consider the ownership of the property. In some cases, an individual may hold legal ownership in a property for another individual in trust. A beneficial owner is a person or entity who is beneficially entitled to the income and proceeds from the asset. If the beneficial owner of a trust is absolutely entitled to a CGT asset as against a trustee, any act done by the trustee is treated as if it was carried out by the beneficiary. The core principle underpinning the concept of absolute entitlement is the ability of a beneficiary, who has a vested and indefeasible interest in the entire trust asset, to call for the asset to be transferred to them or to be transferred at their direction. A trust is a bare trust where the trustee has no interest in the trust assets other than that existing by reason of the office of trustee and the holding of the legal title, and who never has had active duties to perform or who has ceased to have those duties with the result that in either case the property awaits transfer to the beneficiary or at their direction In your situation, it is considered that you held the property in trust for your step-child for the following reasons: ● The only reason that your name was placed on the property's certificate of title was to satisfy the conditions stipulated by the financial institution. ● You did not have any active duties to perform as trustee. | Detailed Reasoning - Application in your circumstances: As your Step-child had a vested, indefeasible and absolute interest in the asset from the day it was purchased, they were always absolutely entitled to the asset as against you as the trustee and have always been the beneficial owner of the property. Accordingly, you will not make a capital gain or capital loss on the sale of the property by you as trustee to the purchaser as you were not an owner of the property for CGT purposes.

Relevant facts: In ‘X’ your step-child, ‘B’, wanted to purchase property ‘X’ as their main residence. | ‘B’ was unable to secure finance without another party being included on the title to the property. | You agreed to be included on the title to the property for the purposes of securing finance. | You provided a loan of an amount to ‘B’ to assist in the acquisition of the property. | ‘B’ repaid an amount of the loan within a short period from the proceeds of the sale of an investment unit. | The remaining amounts have been repaid in full. | ‘B’ has been responsible for all the outgoings in relation to the property. | ‘B’ has undertaken renovations to the property after a period of time. | ‘B’ paid for the renovations in full. | ‘B’ discharged the mortgage after a number of years. | ‘B’ obtained legal advice in relation to their will and as a result of this advice title to the property was transferred from tenants in common in equal shares to joint tenants. | The title was subsequently changed for asset protection purposes and no consideration was provided. | You have not resided in the property and consider the property to be solely ‘B’. | ‘B’ has sold the property. | You have provided a statutory declaration that states that the property was beneficially owned by ‘B’.