Private ruling: CGT - transfer of property
Date of advice: 8 October 2025
Published: 24 November 2025
Ruling period: Income year ended 30 June 20YY | Income year ended 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Did you as Trustees have a CGT event A1 under subsection 104-10(1) of Part 3-1 of the Income Tax Assessment Act 1997 (ITAA 1997) arising from the transfer of title of the Property? | A1: Yes | Q2: Given that the proceeds include a loan repayment and interest accrued over several financial years, is the interest derived under section 6-5 of the ITAA 1997 in the year it was received, in accordance with the cash basis of accounting? | A2: Yes

Relevant facts and circumstances: 1. F1 wanted to purchase the Property. 2. F1 and F2 took out a loan with a Bank to purchase the Property. 3. T1 and T2 were named as guarantors on the loan. T1 and T2 were not co-borrowers. 4. T1 and T2 were named on the property title with F1 and F2. 5. T1 and T2 also agreed to loan money to F1 to help purchase the Property. 6. At no point did T1 and T2 access the Property; it served as F1's main residence, and they covered all outgoings and maintained the Property. 7. F1 borrowed additional funds from T1 and T2 for the Property. 8. There was no written loan agreement between T1 and T2 and F1 for the initial loan amount and further loans. 9. The Property sold, resulting in a capital gain. 10. Upon the sale of the Property F1 repaid their loan with T1 and T2. 11. It was mutually agreed that T1 and T2 had no beneficial ownership of the Property. 12. The Property was never used to produce income and remained F1's primary residence throughout the entire ownership period. 13. T1 and T2 held their interest in the Property solely in a trustee capacity for F1.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 section 106-50 | Income Tax Assessment Act 1997 Subdivision 115-C of Part 3-1 | Income Tax Assessment Act 1936 Division 6 of Part III | Property Law Act 1958 (XXX)Section 53

Reasons for decision: Detailed Reasoning - Detailed reasoning: Subsection 104-10(1) of the ITAA 1997 states that 'CGT event A1 happens if you dispose of a CGT asset'. Subsection 104-10(2) of the ITAA 1997 provides that 'you dispose of a CGT asset if a change in ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner'. In Ellison & Anor v Sandini Pty Ltd & Ors; FC of T v Sandini Pty Ltd & Ors [2018] FCAFC 44, Jagot J stated the following about the meaning of 'beneficial owner' for the purposes of section 104-10 of the ITAA 1997: ... a "beneficial owner" of an asset has more than a mere proprietary interest in the asset. To be a beneficial owner the person must have rights which a court of equity would enforce involving full dominion over the asset... (at paragraph 99) In the current circumstances, the Property was sold (disposed of) and CGT event A1 happened. Generally, where the legal owner of a CGT asset disposes of the asset, a CGT event happens to the legal owner in respect of the CGT asset. However, a CGT event will not happen to a legal owner who disposes of a CGT asset where the legal owner continues to be the beneficial owner of the CGT asset (section 104-10 of the ITAA 1997) or where the legal owner held the asset as trustee and there is a beneficiary that is absolutely entitled to the CGT asset as against the trustee (section 106-50 of the ITAA 1997). Subsection 106-50(1) of the ITAA 1997 states that '... from just after the time you become absolutely entitled to a CGT asset as against the trustee of a trust (disregarding any legal disability), the asset is treated as being your asset (instead of being an asset of the trust)'. Subsection 106-50(2) of the ITAA 1997 treats an act done in relation to the asset by the trustee as an act done by the absolutely entitled beneficiary. For section 106-50 of the ITAA 1997 to apply in the current circumstances T1 and T2 must hold their ownership interest in the Property on trust for F1. | Detailed Reasoning - Is there a trust?: Subsection 53(1) of the Property Law Act 1958 (XXX) states: Subject to the provisions hereinafter contained with respect to the creation of interests in land by parol - (a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorized in writing, or by will, or by operation of law, (b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will, (c) a disposition of an equitable interest or trust subsisting at the time of disposition must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorized in writing or by will. Subsection 53(2) of the Property Law Act 1958 (XXX) states 'this section shall not affect the creation or operation of resulting, implied, or constructive trusts'. Trusts may be of three kinds: express, constructive, or resulting. | Detailed Reasoning - Express Trust: An express trust is one intentionally created by the owner of property in order to confer a benefit upon another. It is created by express declaration, which can be affected by some agreement or common intention held by the parties to the trust. For an express trust to be created it is necessary that there is certainty of the intention to create a trust, subject matter, and the object of the trust. | Detailed Reasoning - Constructive Trusts: A constructive trust is a trust imposed by operation of law, regardless of the intentions of the parties concerned. It applies whenever equity considers it unconscionable for the party holding title to the property in question to deny the interest claimed by another. The existence of a constructive trust is dependent upon the order of the court. | Detailed Reasoning - Resulting or implied trusts: On the purchase of real property, a resulting trust may be presumed where the legal title that vests in one or more of the parties does not reflect the respective contributions of the parties to the purchase price. A resulting trust arises by operation of law and falls into two broad categories. One such category is where someone purchases property in the name of another; Calverley v Green [1984] HCA 81 ( Calverley v Green ). If a resulting trust arises, the party, or parties, who hold the legal title is, or are, presumed to hold the property upon resulting trust in favour of those who contributed to its purchase cost. That is, the law presumes that the purchaser, as the person providing consideration for the purchase intended to retain the beneficial interest, although the legal interest is in the other's name. The presumption of resulting trust may be rebutted by: • a presumption of advancement that arises and is not rebutted, or • evidence of the contributors' common intention at the time of the property purchase contrary to the resulting trust arising: Calverley v Green. In the current circumstances, F1 and F2 borrowed money from the bank (mortgage), and F1 borrowed money from T1 and T2, to purchase the Property. T1 and T2 agreed to be guarantors on the NAB loan but were not co-borrowers. Only F1 and F2 contributed money to purchase the Property (the money loaned from the bank, and the money loaned from T1 and T2). Although only F1 and F2 contributed money to the purchase of the Property, T1 and T2 were also named on the title of the Property. It was agreed between T1, T2, and F1, that T1 and T2 had no beneficial ownership of the Property. F1 used the Property as their main residence and was responsible for the outgoings and maintenance of the Property. T1 and T2 did not use the Property to produce income. The facts and circumstances here are accepted as giving rise to a resulting trust whereby the legal ownership of T1 and T2 in the Property is presumed to be held for the benefit of F1 and F2 (who contributed the money to purchase the Property). There is nothing in the arrangement that rebuts the presumption of resulting trust. | Detailed Reasoning - Absolutely entitled?: Draft Taxation Ruling TR 2004/D25 Income tax: capital gains: meaning of the words absolutely entitled to a CGT asset as against the trustee of a trust as used in Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (TR 2004/ D25) states: 10. The core principle underpinning the concept of absolute entitlement in the CGT provisions 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. This derives from the rule in Saunders v. Vautier applied in the context of the CGT provisions... The relevant test of absolute entitlement is not whether the trust is a bare trust... 20. The most straight forward application of the core principle is one where a single beneficiary has all the interests in the trust asset. Generally, a beneficiary will not be absolutely entitled to a trust asset if one or more other beneficiaries also have an interest in it... 21. A beneficiary has all the interests in a trust asset if no other beneficiary has an interest in the asset (even if the trust has other beneficiaries). 22. Such a beneficiary will be absolutely entitled to that asset as against the trustee for the purposes of the CGT provisions if the beneficiary can (ignoring any legal disability) terminate the trust in respect of that asset by directing the trustee to transfer the asset to them or to transfer it at their direction... 23. If there is more than one beneficiary with interests in the trust asset, then it will usually not be possible for any one beneficiary to call for the asset to be transferred to them or to be transferred at their direction. This is because their entitlement is not to the entire asset. 24. There is, however, a particular circumstance where such a beneficiary can be considered absolutely entitled to a specific number of the trust assets for CGT purposes. This circumstance is where: • the assets are fungible; • the beneficiary is entitled against the trustee to have their interest in those assets satisfied by a distribution or allocation in their favour of a specific number of them; and • there is a very clear understanding on the part of all the relevant parties that the beneficiary is entitled, to the exclusion of the other beneficiaries, to that specific number of the trust's assets... 54. ... the requirements for absolute entitlement within the context of the CGT provisions cannot be satisfied if there are multiple beneficiaries in respect of a single asset such as land. While each beneficiary may have an interest in, and therefore be entitled to, a share of the land, the asset to which the provisions refer is the land and no beneficiary in this case is entitled to the whole of it... 93. Assets are fungible if each asset matches the same description such that one asset can be replaced with another. Assets are fungible if they are of the same type (for example, shares in the same company and with the same characteristics)... 102. ... if there is only one asset in the asset class, then the test of fungibility is not satisfied because there is no other asset that could replace it. In any event, if the asset is not divisible, it is impossible, from the asset , to satisfy the claims of a beneficiary with a shared interest. Under the resulting trust, F1 and F2 were beneficially entitled to the trust asset (T1 and T2's part legal ownership of the Property). The trust had more than one beneficiary (F1 and F2) that could claim an interest in the trust asset. As the trust had two beneficiaries, no beneficiary could be absolutely entitled to the trust asset as against the trustee unless the trust asset was fungible. The trust asset was a single asset (part legal ownership of the Property) and could not be replaced. The trust asset was not fungible. As the trust asset was not fungible, no beneficiary of the trust (F1 or F2) was absolutely entitled to the trust asset as against the trustee (T1 and T2) - neither F1 nor F2 could call on T1 and T2 to transfer the trust asset to them or at their direction. As the trust did not have a beneficiary that was absolutely entitled to the trust asset as against the trustee when the Property sold, T1 and T2 (as trustee) had a CGT event A1 happen in respect of their ownership interest in the Property, which resulted in a capital gain. Division 6 of Part III of the Income Tax Assessment Act 1936 (ITAA 1936) sets out rules for assessing the net income of a trust estate. However, where the net income of the trust estate exceeds nil and includes a capital gain, the rules in Subdivision 115-C of Part 3-1 of the ITAA 1997 (Subdivision 115-C) determine whether tax is payable by the Trustee. The ruling has not considered the application of Subdivision 115-C. | Detailed Reasoning - Detailed reasoning: Subsection 6-5(2) of the ITAA 1997 states that 'if you are an Australian resident, your assessable income includes the ordinary income you derived directly or indirectly from all sources, whether in or out of Australia, during the income year'. Taxation Ruling TR 98/1 Income tax: determination of income; receipts versus earnings sets out the Commissioner's view about when income is derived and states the following about interest income: 47. The general principle is that interest is only derived, or arises, when it is received or credited. This general rule is subject to the overall principle that the appropriate method is that giving a substantially correct reflex of income...'. In the current circumstances, the interest payable under the loan F1 had with T1 and T2 was paid in 20YY. The interest is derived and properly included in the assessable income of T1 and T2 in the income year it was received.