Private ruling: Absolute entitlement
Date of advice: 25 June 2019
Published: August 2019
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: For the purposes of section 106-50 of the Income Tax Assessment Act 1997 (ITAA 1997) - (a) Was the Deceased absolutely entitled to the Property from the date of its purchase by X until the date of their death? | A2: Having regard to all the circumstances, it is accepted that the presumption of advancement has been rebutted and that X held the title to the Property on trust for the Deceased. It is also accepted that the Deceased, and subsequently their estate, were absolutely entitled to the Property as against X as trustee. Section 106-50 of the ITAA 1997 will apply to treat any act done by the trustee as done by the beneficiary. Therefore, in this case the sale of the Property will be treated as though the deceased estate sold the Property.

Relevant facts and circumstances: The Deceased and X are parent and child. The Deceased attempted to purchase a property in 20XX. The vast majority of the purchase price was to be provided by the Deceased with X providing the small shortfall amount. The understanding between them was that, when the property was transferred to them, the interests which they would take in it would reflect the financial contributions which they each had made to the purchase. Ultimately the purchase did not proceed. After the failure of that attempted purchase the Deceased decided to purchase the Property. Its price was less, and sufficiently so that the Deceased could afford to purchase it without a financial contribution from X. Consequently, the Deceased decided to make the purchase alone. The Deceased's health issues limited their mobility and physical capacity, and they had found the first attempted purchase, particularly the need to attend upon the real estate agent and solicitors, to be an undue burden which she preferred not to have to endure again with the purchase of the Property. As a consequence, the Deceased decided that - (a) the purchase of the Property should proceed in the name of X, (b) the Deceased would provide the whole of the funding for the purchase price, including stamp duty and legal costs, (c) title to the property would stand in the name of X, but the Deceased would be the true owner, (d) the Deceased and X would live together in the property, and (e) post acquisition, the Deceased would meet ongoing holding costs such as insurance, council rates and charges, and maintenance costs. X entered into a contract to purchase the Property on XX/XX/20XX. The Deceased provided all of the funding required for the purchase, including the price, stamp duty and legal costs, and it was duly settled on XX/XX/20XX. The property was transferred into the name of X. Thereafter, the Deceased met all of the maintenance and holding costs for the Property. On the settlement of the purchase the Property became the principal place of residence of the Deceased and X. The Deceased continued to live there until XX/20XX when they were admitted to a nursing home where they resided until they died on XX/XX/20XX. X sold the Property within two years of the Deceased's death. X and their siblings are the residuary beneficiaries under the last will of the Deceased. X's siblings were concerned that instead of treating the Property as part of the Deceased's estate, X would attempt to keep the property as its title was held in X's name. To alleviate their concerns, shortly after the death of the Deceased, on express instructions from X, X's solicitor wrote to X's siblings, to confirm among other things, that - (i) the funds for the purchase of the Property had been provided by the Deceased, and (ii) it had been the shared understanding of the Deceased and X that 'although the house was purchased in (X's) name, it would be (theirs) in name only, and the deceased would be the beneficial owner of the property'. Upon the settlement of the Property, most of the sale proceeds was passed on to the deceased estate and then distributed to each of the siblings in equal shares. A small portion of the sale proceeds was retained in case the private ruling decision was unfavourable and capital gains tax was payable by X on the sale. If the private ruling decision was favourable then the remaining portion of the sale proceeds would be passed on to the deceased estate for distribution in equal shares to the siblings.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 106-50


(b) Was the deceased estate absolutely entitled to that Property from the date of their death until the disposal of the Property?