Private ruling: Capital gains tax - real property - trust
Date of advice: 15 October 2015
Published: October 2014
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 20YY

Ruling: Q1: Do you have an ownership interest for capital gains tax (CGT) purposes in the dwelling located at X? | A1: No.


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 106-50

Reasons for decision: Summary: In order to determine whether you will be liable for capital gains tax (CGT) when the property was transferred solely into your relative's name we need to consider the ownership of the property. In some cases, an individual may hold legal ownership in a property for another individual in trust. A beneficial owner is a person or entity who is beneficially entitled to the income and proceeds from the asset. If the beneficial owner of a trust is absolutely entitled to a CGT asset as against a trustee, any act done by the trustee is treated as if it was carried out by the beneficiary. The core principle underpinning the concept of absolute entitlement is the ability of a beneficiary, who has a vested and indefeasible interest in the entire trust asset, to call for the asset to be transferred to them or to be transferred at their direction. 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, and who never has had active duties to perform or who has ceased to have those duties with the result that in either case the property awaits transfer to the beneficiary or at their direction. In your situation, it is considered that you held the property in trust for your sibling for the following reasons: • The only reason that your name was placed on the property's certificate of title was to satisfy the conditions stipulated by the financial institution. • You did not have any active duties to perform as trustee. As your sibling had a vested, indefeasible and absolute interest in the asset from the day it was purchased, they were always absolutely entitled to the asset as against you as the trustee and have always been the beneficial owner of the property. Accordingly, when your interest in the property was transferred there was no change in beneficial ownership and you will not be liable for CGT.

Relevant facts: Your sibling, ('A'), wanted to purchase a dwelling for their family to live in. | 'A' was unable to obtain a mortgage based on their current casual employment and family situation of being a single parent with a number of dependent children. | You agreed to act as a guarantor for the mortgage and your name was included on the title to the dwelling as a joint tenant. | You agreed to help your sibling for natural love and affection and did not view that the dwelling was an investment. | 'A' and their children resided in the dwelling as their main residence. | You did not receive any income or claim any deductions in relation to the dwelling. | You own your house and have an investment property. | 'A' was responsible for all outgoings and mortgage payments in relation to the dwelling. | 'A' discharged the mortgage in 20XX and title to the dwelling was released by the lender. | Title to the dwelling was to be transferred to sole ownership of 'A' and this did not occur due to the failing health of 'A'. | 'A' will bequeathed the entire dwelling to their children equally and title to the property has been transferred to them as beneficiaries.