Private ruling: CGT - legal vs beneficial
Date of advice: 5 November 2024
Published: 16 December 2024
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will a capital gains tax (CGT) event occur under Division 104 of the Income Tax Assessment Act 1997 (ITAA 1997) when you transfer your 50% interest in the property to your relatives? | A1: No. The Commissioner accepts that you held the legal interest in the property on trust for your relatives, who obtained full beneficial ownership of the property at the time the property was purchased. Therefore, as you have no beneficial ownership interest in the property, subsection 104-10(2) of the ITAA 1997 provides that no CGT event will occur when you remove yourself from the property title and the mortgage.

Relevant facts and circumstances: Your relatives wanted to purchase a property (the property). Upon applying to purchase the property your relatives were informed that they would not be able to obtain finance. You agreed to be a co-mortgagor and obtain a legal interest in the property solely to enable your relatives to obtain finance for the purchase of the property. You provided contemporaneous documentation stating that you become a co-mortgagor and obtain a legal interest solely to enable your relatives to purchase a dwelling for themselves. Your relatives paid all the costs, stamp duty and fees relating to the purchase of the property. The property has been the main residence of your relatives from the settlement date. You have your own home with your family. You did not make any financial contributions to the purchase or upkeep of the property, nor have you obtained any benefit. Your relatives will remove you from the mortgage and title in the current income year.

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