Private ruling: Legal vs equitable ownership
Date of advice: 5 November 2025
Published: 22 December 2025
Ruling period: XX June 20XX | XX June 20XX
Date scheme commenced: DD MM YY

Ruling: Q1: Will CGT event A1 occur when you dispose of your ownership interest in the Property? | A1: Yes

Relevant facts and circumstances: In 20YY, Person B wanted to purchase a property and build a home to reside in. Person B was unable to obtain a loan, and you agreed to apply for the loan to purchase the vacant land located C State and were included on the land title holding a % ownership interest. The cost of the land purchased was $XX You stated the purchase price of the land comprised: • A $XX initial deposit for the purchase of the land on DD MM YY, as evidenced was paid by Person B. • A second deposit of $XX paid by on DD MM YY, the receipt for this was in both Person B and your name • A bank loan to fund % in the amount of $XX. • A contribution by Person B of $XX, for the stamp duty and transfer fees. However, you were only able to provide documentation that the loan was in both names and a receipt for the deposit amount of $XX showing both your names, you were not able to show that only Person B had paid the deposit, stamp duty, and transfer fees. Soon after settlement a second loan was taken out to construct a dwelling on the land, the land itself was used as collateral for this loan. The second loan for the construction of the dwelling was also applied for under both Person B and your names. The initial loan repayments were taken out of your personal bank account and the initial bank communications were addressed solely to your home address You and Person B were recorded as the owners in the contract for the construction of the dwelling with XX Pty Ltd. Person B occupied the property as their main residence from soon after the dwelling was built and paid for the upkeep of the property. You have advised that there was no written agreement between yourself and Person B, it was a verbal agreement between family members. You have advised that you did not seek legal advice at the time the land was purchased.

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 118-130

Reasons for decision: Detailed Reasoning - Detailed reasoning: Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you make a capital gain or loss as a result of a CGT event occurring to a CGT asset in which you have an ownership interest. For this reason, it is important to establish who is the owner of a CGT asset at the time a CGT event occurs. Under subsection 104-10(2) of the ITAA 1997 provides that you dispose of a CGT asset when you either enter into a contract for its disposal, or where no contract exists, when the change of ownership occurs. Subsection 104-10(4) of the ITAA 1997 explains when you will make a capital gain or capital loss from the disposal of your CGT asset. Section 118-130 of the ITAA 1997 states that for a dwelling that you acquire under contract, you have an ownership interest in it from the time when you obtain legal ownership of it until your legal ownership interest in the dwelling ends. | Detailed Reasoning - When you sell or dispose of an asset: If you dispose of your ownership interest in CGT assets during the year, such as property or shares, you need to work out your capital gain or loss for each asset. If you receive no capital proceeds from a CGT event, you are taken to have received the market value of the CGT asset that is the subject of the event. The market value is worked out as at the time of the event. You are required to obtain a market valuation when transferring property or shares between related parties, such as family members. | Detailed Reasoning - Legal and equitable ownership: The ATO considers that there are extremely limited circumstances where the legal and equitable interests are not the same and that there is sufficient evidence to establish that the equitable interest is different from the legal title. A person's legal interest in a property is determined by the legal title to that property under the property law in the State or Territory in which the property is situated. Where it is asserted that the beneficial ownership and legal ownership of a property are not the same, there must be evidence to show that the legal owner holds the property in trust for the beneficial owner. Relevant evidence includes information that evidences the intentions of the parties at the time the property was purchased or transferred from one legal owner to another, and evidence of contributions made by the parties towards the purchase price. Taxation Ruling TR 93/32 Income tax: rental property - division of net income or loss between co-owners (TR 93/32) contains guidance on the issues involved where the equitable interest in a property may not follow the legal title. As stated in TR 93/32 paragraphs 38 to 41, it has been said that if the equitable interest does not follow the legal title, there is some basis for the profit/loss to be distributed on the equitable and not the legal basis. We will assume where taxpayers are related, e.g., husband and wife, that the equitable right is exactly the same as the legal title. | 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. While trusts can be created orally, all State Property Law Acts contain provisions that preclude the creation or transfer of interests in land except if evidenced in writing. | 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. As noted by Gibbs CJ, in Calverley v Green [1984] HCA 81 :(Calverley v Green case). A trust is presumed in favour of the party providing the purchase money. If an individual purchases and then pays for a property, but legal title is transferred to another person at their direction, the presumption of a resulting trust arises - the property is held in trust for them. 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 others name. However, there are instances where this application may not apply, including: • where there is evidence of a specific intention to hold beneficial interest in the property for another person who contributed no amount, or a lesser amount, towards the purchase price. • where the presumption of advancement applies (not relevant to your circumstances). • where a court orders that property is held on trust (not relevant to your circumstances). | Detailed Reasoning - Application to your circumstances: Documentation provided to support that your ownership interest in the property was held on trust for Person B is inconclusive. There is no evidence of an intention at the time of purchase that you would hold your ownership interest in the property on trust. Documentation provided to support that the property was purchased for Person B is inconclusive. There is no evidence of an intention at the time of purchase that Person B would be the sole equitable/beneficial owner of the property and is insufficient to demonstrate that an express trust was created. There is insufficient evidence of a resulting trust. While Person B may have contributed an initial deposit of $XX for the purchase of vacant land, evidence indicates that you also contributed to the second deposit of $XX paid on DD MM YY. No evidence was provided to support that the stamp duty and land title transfer fees where solely paid by Person B. As you were a loan applicant with Person B you contributed to the purchase price, then you consented to using the vacant land as collateral to apply for a second loan to construct a dwelling on the land, as you were also a loan applicant for the second loan you have also contributed to the price to construct the dwelling. As you have not provided the Commissioner with sufficient evidence that you held your ownership interest in the property on trust for Person B when it was acquired, CGT event A1 will occur for you when the property is sold under section 104-10, with both legal and equitable interest having been held by yourself, at all times. Any capital gain or loss made from the sale of the property cannot be disregarded and must be included in your income tax return in the relevant income year. As the property was held for over 12 months, you can apply the 50% CGT discount to any capital gain you may incur upon the disposal of your ownership interest in the property. You may also be able to apply the second element of the cost base for capital gains - incidental costs of acquiring the CGT asset or that relate to the CGT event.