Private ruling: CGT - legal v beneficial ownership
Date of advice: 10 July 2025
Published: 1 September 2025
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is Individual X the child of Individual Z and Individual Y the beneficial owner of the property? | A1: No. | Q2: Will a CGT event happen to Individual Z and Individual Y when the property is sold? | A2: Yes. | Q3: Will Individual X be entitled to a main residence exemption on the sale of the property? | A3: No.

Relevant facts and circumstances: Individual X, the child of Individual Z and Individual Y was to purchase the property. Lawyers' letter dated XX XXX 20XX, addressed to Individuals Z and Y for the purchase of the property. Enclosed with the letter were documents, 'a copy of the of the property which you are purchasing as taken from the title deeds of the property; and a copy of this letter and plan of the property for your records'. We were advised that Individual X paid the deposit directly to Individual Y and Individual Z. The residence of Individual Y and Individual Z has been another property. The property has been Individual X's residence since it was purchased. Individual X renovated the property as soon as it settled. It took several months to do the renovations and Individual X lived with Individual Y and Individual Z while this was occurring. Individual X has maintained the property and has renovated the property at their own cost. You have advised that Individual X pays an amount (mortgage repayment) into Individual Z's personal bank account. Individual Z and Individual Y intend that the proceeds of the sale of the property be given to Individual X to purchase a new main residence for themselves. Several documents were provided as part of the application: The purpose of the loan was: Refinance of home loans. Security for the loan: registered mortgage over the other property, given by Individual Y and Individual Z. Meeting with: Individual Y and Individual Z to discuss the borrowing. Date credit guide given to customers Purpose/reason: owner occupied Requirements and objectives: Looking to seek funds to make improvements to investment property. Existing client. Requiring small increase. Bank Home Loan offer, mortgagor Individuals Y and Z at the property's address.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 104-10

Reasons for decision: Summary: Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a capital gain or capital loss results from a CGT event occurring. The most common CGT event, event A1, occurs under section 104-10 of the ITAA 1997 when there is a change in ownership of a CGT asset. Accordingly, when applying the CGT provisions on the sale of property, ownership must be considered. It must be determined who had beneficial ownership of the property. The legal owner of the property is recorded on the title deed for the property issued under that State's legislation. It is possible for legal ownership of property to differ from beneficial ownership. An individual can be a legal owner but have no beneficial ownership in an asset. Where beneficial ownership and legal ownership of an asset are not the same, there must be evidence that the legal owner holds the property on trust for the beneficial owner. A beneficial owner is defined as a person or entity who is beneficially entitled to the asset. To establish occasions where legal and beneficial ownership are not the same (i.e. a trust), there needs to be evidence to rebut the standard presumption that legal and equitable interests are the same. This evidence ordinarily includes: • contemporaneous documentation that clearly shows the parties' intentions at the time the property was purchased, and • documentation that clearly shows that the parties treated the property in accordance with those intentions during the ownership period. Gibbs CJ stated in Muschinski v. Dodds [1985] HCA 78 that the relevant principles included there being contemporaneous evidence: Where both transferees have contributed to the purchase money, the intentions of both are material, but where only one has provided the money it is his or her intention alone that has to be ascertained. The evidence admissible to establish the intention of the real purchaser will comprise 'the acts and declarations of the parties before or at the time of the purchase... or so immediately thereafter as to constitute a part of the transaction' ( Charles Marshall Pty Ltd v Grimsley [1956] HCA 28; (1956) 95 CLR 353 at 365) In relation to evidence of a trust arrangement, the following should also be noted: • contemporaneous evidence includes any documents such as emails, diary entries, bank documents, correspondence with third parties involved in the transaction, etc., that were created at the time of the property's purchase, • where there is little or no contemporaneous evidence of intention and the terms of an arrangement, formal documents prepared many years after a property was purchased will be of little probative value, and • the evidence must be unambiguous. In the absence of clear and compelling evidence to the contrary, the property is considered to be owned by the people registered on the title. 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. 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 - 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). 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. However, there are instances where this application may not apply. This is where the property is transferred to the purchaser's immediate family such as a spouse or a child. In such circumstances, the presumption of a resulting trust is replaced by the 'presumption of advancement'. The rebuttable presumption of advancement deems the purchaser to have prima facie intended to advance the interests of the family members (i.e. an absolute gift). | Detailed Reasoning - Presumption of Advancement: A presumption of advancement is an equitable principle where a person puts property in the name of a spouse, child, or other person. The presumption only applies to transfers and purchases made by people who stand relationships, such as parents and their children. Under a presumption of advancement, the property is transferred with the intention of transferring both the beneficial interest in the property as well as the legal title. The parties hold their equitable interests in the property in the same proportions as their legal interests. In Calverley v Green , Gibb CJ, found three important principles in relation to the presumption of advancement: • Where one party purchases property in the name of the other, it will be presumed that the first party did not intend the other to take a beneficial interest unless there is such a relationship between the parties as gives rise to a presumption of advancement. • The sort of relationship where the presumption will arise is where the relationship is such that it is more probable than not that a beneficial interest was intended to be conferred. • The presumption of advancement may be rebutted by evidence of contrary intention of the purchaser at the time of purchase. If two parties have contributed to the purchase and the legal interest does not reflect the proportions of their contributions, the intentions of both parties at the time of purchase are important. The onus of rebutting the presumption of advancement lies with the party who is considered as having gifted the property to another (usually the purchaser). Evidence is required that demonstrates that the purchaser did not intend the property to be a gift to the other party. In Commissioner of Taxation v Bosanac [2016] FCA 448 the argument of a resulting trust versus the presumption of advancement was discussed at length. The court outlined the following principles: • Although it is referred to as a presumption of advancement, the dominant approach in Australia is that it is strictly not a presumption. • Rather it is a description of certain circumstances, being the existence of relationships, where the presumption of a resulting trust does not arise. • Generally, the court will look to the dealings, documents, and communications at the time of the purchase to determine whether there was intention to retain a beneficial interest. However, evidence of the dealings between the parties after the time of purchase may be a relevant factor. | Detailed Reasoning - Application to your circumstances: In your case, there was no constructive trust. For the other two types of trust, clear contemporaneous evidence is required in order to either establish that there was an express trust or to rebut the presumption of advancement such that a resulting trust may have arisen. There is insufficient evidence to indicate that Individual X contributed to the purchase price of the property and therefore it cannot be presumed there is a resulting trust. The payment of property expenses by a particular person is not evidence that there was a trust created when the property was purchased. You have provided copies of both Individual Y and Individual Z's Wills which do not mention the property and who is the beneficiary when each of you pass. Loan documents which are in the names of Individual Y and Individual Z. The letter of offer from the bank is in the names of Individual Y and Individual Z. The documents indicate that the loan was for an investment property. None of these documents evidence the intention to hold the property on trust - some point towards the property being dealt with as if the legal and beneficial interest were the same. As a result, we do not consider that sufficient evidence has been provided to establish that the equitable interests in the property were different from the legal title. Consequently, CGT event A1 will happen to you in relation to your ownership interest in the property when it is sold. The main residence exemption is available to a taxpayer who has lived in a property as their main residence for the whole of their ownership period and the property has not been used to produce assessable income. As Individual Y and Individual Z have not lived in the property as their main residence, the main residence exemption does not apply to the property to disregard any CGT. Individual X is not the legal owner of the property and although they lived in the property this does not have any affect in terms of the main residence exemption for Individual Y and Individual Z. Individual Y and Individual Z are entitled to the 50% discount on any CGT that arises upon the sale of the property as they have held the property for more than 12 months.