Private ruling: CGT Event B1
Date of advice: 11 September 2019
Published: October 2019
Ruling period: Year ended 30 June XXXX
Date scheme commenced: 1 July XXXX

Ruling: Q1: Did CGT Event B1 happen when your relatives first obtained use and enjoyment of your share of the property through the agreement that was entered into? | A1: Yes. CGT event B1 happens if you enter into an agreement with another entity under which: · the right to the use and enjoyment of a CGT asset you own passes to another entity; and · title in the asset will or may pass to the other entity at or before the end of the agreement: subsection 104-15(1) of the Income Tax Assessment Act 1997 (ITAA 1997). Subsection 104-15(2) of the ITAA 1997 states that the time of the event is when the other entity first obtains the use and enjoyment of the asset. In order for CGT event B1 to happen the relevant agreement must be one under which title will or may pass at the end of a specific period or on the occurrence of a specific event. CGT event B1 will not happen if, under a loose family arrangement, title to an asset may pass at an unspecified time in the future. In your case it is accepted that the agreement entered into by the parties did not constitute a 'loose family arrangement'. Therefore, the Commissioner's view is that CGT Event B1 happened when your relatives first obtained use and enjoyment of your share of the property through the agreement. Further information about the Commissioner's view can be found in ATO Interpretative Decision 2005/216.

Relevant facts and circumstances: You are an individual. You are the parent of person A and parent-in-law of person B (the Children). The Children were the owners of their home, property A which was secured under finance that the Children obtained themselves. The Children serviced all the financial commitments in respect of property A. The Children decided to sell property A and to purchase property B to be their new home. Due to tightening financial regulations, the Children were no longer eligible to receive finance on their own. The lender advised you that you were unable to act as guarantor on the loan or secure the loan with your real property. The only option for the Children to secure finance was for you to be a party to the mortgage and a party on the title of property B. The Children serviced all the financial commitments in respect of property B. Financially, you did not contribute to the loan repayments, nor receive any benefit from being a party to the loan agreement or a party on the title of property B. You entered into an agreement (the Agreement) with the Children to give sole and exclusive right to use, enjoy and alter the property. The relevant sub-paragraphs are as follows: (f) This agreement will last for a period of X years from when finance is provided by Z or when the Children are able to obtain finance themselves, whichever event occurs first or alternatively, may be terminated within the X year period should all three parties agree to terminate the agreement at which time all outstanding costs associated with the mortgage are to be paid by the Children and the title will subsequently transfer to them or the property sold to a third party. (g) The Children have sole and exclusive right to use, enjoy and alter the property during the term of this agreement and the Parent agrees that she has no claim or entitlement over the property during the term of this agreement (h) At the end of this agreement, the parties agree that the title will be transferred to the Children and that the Parent has no claim, right or entitlement to any financial reward or the like provided that all costs associated with the transfer of title and refinancing of the mortgage is paid by the Children The title in property B was intended to pass to the Children after the expiration or termination of the Agreement. The Agreement was entered into, and property B was purchased, during the XXXX-XX income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-15