Private ruling: CGT - legal vs beneficial ownership
Date of advice: 29 April 2026
Published: 13 July 2026
Ruling period: XX XXX 20XX | XX XXX 20XX
Date scheme commenced: XX XXX 20XX

Ruling: Q1: Did CGT event A1 happen to Person A and Person B when they transferred their ownership interest in the property to Person C and Person D? | A1: You and your spouse will be liable to pay capital gains tax as you both were the legal owners of the property.

Relevant facts and circumstances: On XX, XXX 20XX, Person A and their spouse, Person B (collectively referred to as 'you') bought the property located at Address A (the property). You agreed to buy the property for Person A's sibling, Person C and their spouse, Person D as they were temporary residents and not eligible for a loan. You secured a loan with Bank A to buy the property. You paid the deposit for the property as a gift to Person C and Person D. You were registered on the property title for the property. The Deed refers to Person A and Person B as 'the Trustees' and Person C and Person D as 'the Beneficiaries'. Clause 2 of the deed states that: The Trustees hereby declare that they hold the Property as joint trustees for the Beneficiaries as tenants in common in equal shares, absolutely, as follows: • 50% share - Person C • 50% share - Person D Clause 3 of the Deed specifically provides the trustees the power to maintain and manage the property. Clause 4(a) of the Deed states that 'all rental income, profits and proceeds derived from the property shall belong to the beneficiaries in their respective shares, after deduction of lawful outgoings.' Clause 4(b) of the Deed states that: The Beneficiaries shall be solely responsible for the payment of all property-related expenses including but not limited to: • mortgage repayments • council and water rates • building and contents insurance and • general maintenance, repairs and any other costs associated with the upkeep or improvement of the Property. The deed was not registered with Landgate as required for the purpose of registering a trust over land in state A. You reported rental income and deductions associated with the property in your personal income tax returns for the 20YY-YY- and 20YY-YY-income years. Person C made all monthly loan repayments. You provided a bank statement showing that Person C also made payments of $XX,XXX on XX XXX 20XX, $XX, XXX on XX XXX 20XX and $XX,XXX on XX XXX 20XX into your personal bank account to assist in searching for a property. Person C and Person D were granted permanent visas on XX XXX 20XX. On XX XXX 20XX, all 4 parties signed statutory declarations confirming the arrangement to purchase the property on behalf of Person C and Person D (The arrangement) On XX XXX 20XX, Person E (Loan officer) signed a statutory declaration confirming the arrangement. Person C and D secured a loan from Bank B for $XXX,XXX to buy the property from Person A and Person B. On XX XXX 20XX, you transferred the property to Person C and Person D.

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

Reasons for decision: Detailed Reasoning - Capital Gains Tax: Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) states that a capital gain or capital loss is made only if a CGT event happens to a CGT asset. An ownership interest in a property is a CGT asset under section 108-5 of the ITAA 1997. Section 108-7 of the ITAA 1997 treats individuals who own a CGT asset as joint tenants as if they each owned a separate CGT asset constituted by an equal interest in the asset and as if each of them held that interest as a tenant in common. Under subsection 104-10(1) of the ITAA 1997 CGT event A1 happens if you dispose of a CGT asset, however, subsection 104-10(2) of the ITAA 1997 provides that a disposal of a CGT asset does not occur if there is only a change of legal ownership and no change of beneficial ownership. It is recognised that an individual can be a legal owner of a property but have no beneficial ownership. In these circumstances, it is the individual who has beneficial ownership of a property who is subject to a CGT event upon sale. Under Division 115 of the ITAA 1997, the owner of a CGT asset may be eligible for a discount on the capital gain incurred on the disposal of the asset where relevant criteria are met, including holding the asset for longer than 12 months. | Detailed Reasoning - Legal v beneficial ownership: An entity's legal ownership of real property is the ownership interest which is stated on the property's legal title in accordance with the property law legislation in the State or Territory in which the property is situated. A beneficial owner is defined as a person or entity who is beneficially entitled to the asset. An individual can hold a legal ownership interest but have no beneficial ownership interest in an asset. Where the 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. 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 paragraph 41 of TR 93/32, the Commissioner 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. Although TR 93/32 deals primarily with rental property, the Commissioners view as stated in paragraph 41 applies broadly to all properties where there are multiple owners. | Detailed Reasoning - Express Trusts: An express trust is one intentionally created by the owner of property 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, the trust's 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. State specific information provided. | Detailed Reasoning - Resulting or implied trusts: On the purchase of real property, a resulting trust may arise in situations where the legal title that vests in one or more of the parties does not reflect the respective contributions of the parties to the property's 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 56 ALR 483) ( Calverley ). 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 other person's name. The presumption of a resulting trust can be rebutted by evidence of the parties' intentions at the time of purchase | Detailed Reasoning - Capital Gains implications: When determining whether legal ownership and beneficial ownership of an asset are different, our starting point, as noted in TR 93/32 is that the beneficial ownership of the Property is the same as the legal ownership. The onus then lies with the taxpayer to rebut this conclusion through evidence to the contrary. In your circumstances, you paid a deposit towards the property and subsequently took out a loan under your names for the remainder of the purchase price. The property was registered in your names as joint tenants and therefore, you held both legal and beneficial interest in accordance with TR 92/32. For the purposes of section 108-7 of the ITAA 1997, your legal ownership interest in the property is treated as a separate CGT asset which is subject to a CGT event A1 when you dispose of it unless it can be demonstrated that the property was held on trust for Person C and Person D, that is, you had no intention to hold beneficial interest. | Detailed Reasoning - Did you hold the property on trust for XX and XX: For the purposes of establishing an express trust, you must be able to provide such information as required to create certainty of the intention to create a trust, subject matter, and the object of the trust. You provided a trust deed dated XX XXX 20XX which provides yourselves as the trustee's and Person C and Person D as the beneficiaries. The deed states that you as the trustee's hold the property on trust for the beneficiaries in equal shares absolutely as tenants in common. Under the Deed, the powers and duties of the trustees allow the trustees to exercise all powers considered upon the State based act as necessary to properly manage and maintain the property except where expressly restricted in the Deed. The Deed further provides that all rental income, profits, and proceeds derived from the property shall belong to the beneficiaries in their respective shares. The Commissioner is apprehensive to accept this document. It is observed that during conversations with the Commissioner, no such indication of a trust existed until the Commissioner raised concerns that initial documents provided by yourself would not discharge the onus that you did not hold beneficial interest in the property and was only provided after the Commissioner expressly discussed the requirement of having a trust in writing with you. The fact the document was provided so late in the ruling process is also of particular concern in that the Commissioner would consider this document be provided upfront with the ruling request or after initial subsequent requests for information to support your position. It is also observed that documents, actions, and conversations after the implementation of the Deed are inconsistent with you holding the property on trust as trustees. These include: • Allocation of rental income and deductions. The Commissioner observes all rental income and deductions were reported by you in your tax returns rather than the beneficiaries. This is contrary to the Deed which specifically provides that the income shall belong to the beneficiaries rather than the trustees. Further, the Commissioner has concerns in that you have reported these amounts as income and claimed associated deductions but stated [via a trust deed] you were not entitled to do so. It is therefore inconsistent to maintain these amounts as mortgage repayments whereby in your actions you have treated it in character as rental income. Although the amounts may be utilised to paying off the mortgage, this does not in effect characterise it as such in your hands, similarly in the claiming of interest deductions. • Loan documents. The loan documents provided by yourself indicate the loan was taken out in your personal capacity rather than as trustees. Although not prohibitive, we observe that where the loan was taken out in your capacity as trustee, relevant documentation would be evidenced to support this. In addition, no further contemporaneous evidence was provided between yourself and the bank which lends that you were obtaining the loan to support your family. • Bank statements showing payments made by Person C to your personal bank account do not indicate they were used for the purchase of the property, rather, the amounts and associated descriptions indicate they were amounts paid to discharge another loan repayment. • Foreign Withholding Clearance Certificate (FRWC). The Commissioner observes that upon lodging the FRWC, no declaration was made to indicate the property was held as trustee but rather in your personal capacity. • FIRB Rules. Upon being asked whether FIRB approval was received for the property, you stated that the beneficiaries would not have legal or beneficial interest in the property and therefore didn't need to apply for FIRB. We consider this to be contradictory not only to the Deed which you provided the Commissioner but also your broader advancement that Person C and Person D held beneficial interest in the property. Alternatively, the Commissioner observes that in the circumstance the Deed was accepted, a trust would have been created over the property as of XX XXX 20XX. However, this does not mean that the CGT event A1 would be disregarded unless the beneficiary absolutely entitled to the property at the time of the trust's conception. Where a beneficiary is not absolutely entitled at the trust's conception but later becomes absolutely entitled, a CGT event E5 will trigger. Section 106-50 of the ITAA 1997 provides that if a beneficiary is absolutely entitled to a CGT asset as against the trustee, any act done by the trustee in relation to the asset is taken to have been done by the beneficiary. The Commissioner considers that the test of absolute entitlement is based on whether the beneficiary can direct the trustee to transfer the trust property to them or at their direction. While the existence of a bare trust may be a good indicator that a beneficiary of the trust is absolutely entitled, it is not necessary to establish that the trust is a bare trust in order to establish absolute entitlement. Likewise, the existence of a bare trust does not lead automatically to the conclusion that a beneficiary of the trust is absolutely entitled (paragraph 33 of TR 2004/D25). The concept of a bare trust was discussed by Gummow J in Herdegen & Anor v FC of T 88 ATC 4995; (1988) 84 ALR 271. The usually accepted meaning of 'bare' trust is a trust under which the trustee or trustees hold property without any interest therein, other than that existing by reason of the office and the legal title as trustee, and without any duty or further duty to perform, except to convey it upon demand to the beneficiary or beneficiaries or as directed by them. In Oswal v. Commissioner of Taxation [2013] FCA 745 ( Oswal ) , the Court reconfirmed the accepted view of what is meant by 'absolutely entitled to the asset as against the trustee' and noted that the following aspects were impediments to absolute entitlement: • the exercise by a trustee of a power of sale, either expressed in the instrument creating the trust or conferred by statute, of an asset vested in the trustee for the absolute benefit of a beneficiary would defeat that beneficiary's interest in the asset, and • a trustee's right of indemnity in respect of liabilities and expenses properly incurred as trustee of a trust fund as provided for in the Trust Deed. Edmond J in Oswal, citing the High Court in the case of Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226, observed: It is in the nature of the office of a trustee, whether expressed in the instrument, or not, that the trust property shall reimburse him all the charges and expenses [sic] incurred in the execution of the trust. The entitlement of a trustee who has borrowed moneys for application to trust purposes has been described as follows: Where the trustee acting within his powers makes a contract with a third person in the course of the administration of the trust, although the trustee is ordinarily personally liable to the third person on the contract, he is entitled to indemnity out of the trust estate. If he has discharged the liability out of his individual property, he is entitled to reimbursement; if he has not discharged it, he is entitled to apply the trust property in discharging it, that is, he is entitled to exoneration. In aid of that right to reimbursement or exoneration for liabilities properly incurred in the administration of the trust, the trustee cannot be compelled to surrender the trust property to the beneficiaries until the claim has been satisfied. In that sense, the entitlement to reimbursement or exoneration confers a priority in the further administration of the trust. Accordingly, in an administration action, if it appears probable that the trust fund will be insufficient for the full recoupment of the trustee, the trustee is entitled to the insertion in the order for administration of a direction that there be payment in the appropriate order of priority. In your case, the trustee had fiduciary duties beyond simply holding the property on title for the beneficiaries by both being indebted to the bank for the loan to which the purchase price of the property was paid and managing the rental affairs of the property. In managing the affairs of the property, clause 3(d) of the Deed confers upon the trustees under the Trustees Act 1962 (WA) ( Trustees Act ) the powers necessary to properly manage and maintain the property. Section 71 of the Trustees Actprovides: • a trustee may reimburse himself for or pay or discharge out of the trust property all expenses reasonably incurred in or about the execution of the trusts or powers. As the trustee's liability to the loan would remain until such a time it was discharged in full, the trustees would retain the right to indemnify themselves out of the trust assets (i.e., the property) and therefore, the principles in Oswalapply to mean the beneficiaries are not absolutely entitled. TR 2004/D25 makes clear that absolute entitlement for the purposes of section 106-50 of ITAA 1997 requires that a beneficiary be solely entitled to a specific trust asset and be able to call for its immediate transfer as against the trustee. Paragraphs 90 and 93 of TR 2004/D25 provides that the Commissioner recognises only a narrow exception where an asset is fungible, such that it is one of several identical and interchangeable assets and no beneficiary needs to identify a particular item. Paragraphs 91, 92 and 94 advises in contrast, where a trust asset is non-fungible, the existence of more than one beneficiary with an interest in that asset will prevent any beneficiary from being absolutely entitled, as no beneficiary can point to the asset and assert exclusive beneficial ownership. Land is inherently non-fungible, being unique and incapable of substitution, and therefore cannot support joint or shared absolute entitlement. Accordingly, where land is held on trust for multiple beneficiaries, even where their interests are fixed, vested and indefeasible, no beneficiary will be absolutely entitled to the land as against the trustee for CGT purposes Based on the evidence we can accept, Person C and Person D did not hold beneficial interest in the property. Therefore, CGT event A1 will happen to you. Each person's capital gain or loss is determined according to their legal interest in the property.