Private ruling: Capital Gains Tax
Published: May 2014
Ruling period: Year ending 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Question and answer | Are you able to apportion the capital gain made on the sale of your property on a legal and equitable ownership basis? | No.

Relevant facts and circumstances: You and your spouse purchased a block of land so that your family member could build a house on it to be closer to you. Your family member has a disability and needs assistance with day to day life. The title of the property is in your and your spouse's names as legal owners. Your family member had a house built on the land and paid for this with the proceeds from the sale of their main residence. Your family member entered into a contract to have the house built on the land. You state that you and your spouse do not have a written agreement with your family member in relation to this arrangement as your family member did not have the capacity to enter into such an agreement. The property has been sold and a capital gain made.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 118-10 | Income Tax Assessment Act 1997 section 118-30

Reasons for decision: Summary: The capital gains tax (CGT) provisions are contained in Part 3-1 and 3-3 of the Income Tax Assessment Act 1997 (ITAA 1997). CGT is the tax you pay on certain capital gains you make. You make a capital gain or a capital loss when a 'CGT event' happens (section 102-20 of the ITAA 1997). The most common CGT event A1 happens when you dispose of the asset to another party (for example disposal of a dwelling) (section 104-10 of the ITAA 1997). A capital gain or capital loss you make from a CGT event that happens to your main residence is disregarded if you are an individual and the dwelling was your main residence throughout your ownership period (section 118-110 of the ITAA 1997). For dwellings other than flats or home units, an ownership interest is a legal or equitable interest in the land, on which the dwelling is erected, or a licence or right to occupy it section 118-130 of the ITAA 1997. For CGT purposes and in the absence of evidence to the contrary, a property is considered to be owned by the person registered on the title. Evidence to the contrary may include documents that show the registered owner holds the property in trust for someone else. In general, the CGT provisions place the liability for tax on the legal owner of a CGT asset. You and your spouse are the legal owners of the property as you are both on the title deed. There is no evidence that your family member had an equitable interest in the property as they do not appear on the title deed and you did not hold an interest in the property in trust for them. The contract for construction of the house on the land does not evidence that your family member had any ownership rights in the property. Therefore, any capital gain made on the property is required to be declared in your and your spouse's tax return as the legal owners of the property and cannot be apportioned between you, your spouse and your family member.