Private ruling: Legal v equitable ownership
Date of advice: 28 May 2026
Published: 17 August 2026
Ruling period: Year ending 30 June 20YY | Year ending 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Will Capital Gains Tax (CGT) event A1 occur when you transfer the title of the Property to your parents? | A1: No.

Relevant facts and circumstances: You signed the contract for the purchase of a Property on DD MM 20YY for $X. You have not lived in the Property or used the property as your main residence. The Property has not been used to derive assessable income. You have advised that there was no formal agreement regarding the loan arrangement with your parents. No formal trust deed was executed between you and your parents. Your parents found a property they wanted to purchase, but they had not sold their previous home. Your parents did not want to make an offer 'subject to sale', due to previous 'subject to sale' offers of their own home, not being accepted. Your parents did not consider acquiring a loan in their own name to purchase the Property. To alleviate the stress on your parents, due to health concerns, you approached your Bank for a loan to expedite the purchase of a property. You purchased the Property by taking out a loan secured against your own main residence. On DD MM 20YY the Bank advised you that a loan for $X had been conditionally approved. You provided contemporaneous evidence establishing your intentions at the time of purchasing the Property. On DD MM 20YY you signed the Contract for the Land of Land or Strata Titled Property with the real estate agency to purchase the Property. A deposit of $X was required on signing the contract and a further $X was required to be paid within X business days after acceptance. The property was purchased for $X with settlement X days from finance approval. On DD MM 20YY a debit for the deposit was made from your Home Loan account to your Saving account. On the same day the amount was withdrawn from the Savings account, and paid to the real estate agency. On DD MM 20YY a direct credit of $X was made by your parents from their Bank account and deposited into your Home Loan account. Your parents' home was sold with settled on DD MM 20YY. On DD MM 20YY, $X was deposited into your parents' Bank account. On DD MM 20YY your parents' transferred $X from their Bank account (EFT credit TFR new house) into your Savings account. On DD MM 20YY, your Home Loan account was debited for $X and transferred to your Savings account. On the same day $X and $X were transferred (withdrawn) from the savings account, reference numbers provided but no other details. You have advised that land tax on the Property has been paid by your parents. You plan to transfer the legal ownership to your parents. Your parents paid for the stamp duty and other fees associated with the purchase of the Property. You have advised that it was not a priority to immediately transfer the Property, after settlement, due to your parents' ongoing health issues. Your parents have occupied the property as their residence.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 subsection 104-10(1) | Income Tax Assessment Act 1997 subsection 104-10(2)

Reasons for decision: Summary: Section 102-20 of the ITAA 1997 provides that you make a capital gain or loss as a result of a CGT event A1 occurring to a CGT asset in which you have an ownership interest. For this reason, it is important to establish who is the owner of a CGT asset at the time a CGT event occurs. 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 equitable ownership. Legal v equitable ownership Legal interest in a property is determined by the legal title to the property under the property law legislation in the state or territory in which the property is situated. It is possible for legal ownership of a property to differ from the equitable ownership. An equitable owner is defined as a person or entity who is beneficially entitled to the asset. An individual can be a legal owner but have no equitable ownership in an asset. Where the equitable 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 equitable owner. Bare Trust A trust is a bare trust where the trustee has no interest in the trust assets other than that existing by reason of the office of trustee and the holding of the legal title to the assets. In a bare trust the trustee does not have active duties to perform or has ceased to have those duties so that in either case the property is merely awaiting transfer to the beneficiary or to another party at the direction of the beneficiary ( Herdegen & Anor v Federal Commissioner of Taxation 88 ATC 4995; (1988) 84 ALR 271). A trustee cannot make any decisions or have any rights regarding the assets in a bare trust and must deal with the assets strictly at the beneficiary's direction. In Herdegen v FCT (1988) 20 ATR 24, Gummow J described (at 32-33) a bare trust as 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, for example, on sale to a third party. | Detailed Reasoning - Application to your circumstances: At the time of entering into the contract to purchase the Property, you advised the real estate agent that the purchase was being made on behalf of your parents, pending the sale of their existing home. You had been granted a pre-approval for a loan with your bank, to facilitate the purchase. You subsequently entered into the contract and were registered as the legal owners of the Property. Based on the evidence provided, it is accepted that although you held legal title to the Property, you did so solely to facilitate the purchase on behalf of your parents. You did not have any beneficial entitlement to the Property, nor did you exercise independent control or discretion in respect of the Property. The arrangement required you to hold the Property for your parents' benefit until such time as they were able to complete the sale of their previous home and reimburse the additional borrowings secured over your home. The facts are consistent with the existence of a bare trust. In substance, your role was limited to holding legal title, with no beneficial interest in the Property and no active duties beyond transferring or dealing with the Property in accordance with your parents' directions. Your parents were beneficially entitled to the Property at all relevant times. Accordingly, it is concluded that you held the Property as bare trustees for your parents, who were the equitable owners of the Property.