Private ruling: Capital gains tax
Published: March 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Did you and your spouse make a capital gain (or loss) when the property was sold? | A1: No.

Relevant facts and circumstances: Your relative acquired an owner builder permit and built a new home. Your relative decided to relocate. Your relative was unable to obtain an owner builder permit due to certain regulations. Therefore, they bought land in you and your spouse's names and an owner builder permit was issued to you. The property was constructed by your relative using your relative's funds. Your relative moved into the property and the rates were transferred into their name. They were responsible for all costs associated with the property. Your relative advised relevant government agencies of their ownership of the property. You and your spouse mortgaged the property to your relative to show their ownership of the home and to protect their interest. The property was sold in the relevant financial year. You and your spouse have never received any income or profited in any way from the property or the sale of it. Your relative agrees that any capital gain (or loss) made on the property is attributable to them.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 100-20

Reasons for decision: Summary: Under section 100-20 of the Income Tax Assessment Act 1997 (ITAA 1997), an entity will make a capital gain or a capital loss if a capital gains tax (CGT) event happens to a CGT asset. CGT event A1 occurs when you dispose of a CGT asset. You are considered to have disposed of a CGT asset if a change of ownership occurs from you to another entity because of some act or event or by operation of law. The capital gain or capital loss is made at the time of the event (section 104-10 of the ITAA 1997). | Detailed Reasoning - Beneficial ownership: A beneficial owner is defined in Taxation Ruling IT 2486 and Taxation Determination TD 92/106. A beneficial owner is the person or entity who is beneficially entitled to the income and proceeds from the asset. A legal owner is the individual who has their name on the legal documents associated with the CGT asset, an example would be the title deed for a property. An individual can be a legal owner but have no beneficial ownership in an asset. It is the beneficial owner of a CGT asset that is liable for capital gains tax upon sale of the assets. In some cases, an entity may hold a legal ownership interest in property for another individual in trust. In this case, we accept that you and your spouse were not the beneficial owners of the property. Your relative provided all the funds to acquire the property, lived in the property and paid all the associated expenses. Your relative is the beneficial owner of the property. Therefore, when the property was sold you and your spouse did not make a capital gain (or loss).