Private ruling: CGT - gift, legal v equitable ownership
Date of advice: 9 April 2026
Published: 22 June 2026
Ruling period: 30 June 20YY
Date scheme commenced: DD MM 19YY

Ruling: Q1: Will Capital Gains Tax (CGT) event A1 happen when the legal interest in the Property is sold, or transferred to your Child? | A1: Yes.

Relevant facts and circumstances: In 19YY, your Child separated from their partner and need to provide for their children. Your Child had minimal financial support and no accommodation. A property was purchased for $XXX on DD MM 19YY, with settlement due on DD MM 19YY. You paid the deposit and settlement balance, together with a bank loan. Your, undated and unsigned Wills (appear to be prepared in 19YY), grant the entire estate to the surviving partner. If the surviving partner is deceased or does not survive the partner for 30 days, the estate is to be divided equally between your children. You have advised that: • the settlement funds provided by you were by way of a gift. There is no loan agreement documented, no interest charged nor any repayment of the loan - nor any expectation of such. • Your Child was not able to obtain a bank loan to fund a new property. You advised that you had the financial capacity to apply for the loan. • Your Child did not contribute towards the purchase of the property. You advised that your Child was not in a financial position to contribute to any costs associated with the purchase price. • You proceeded to settle the property and apply for the loan in your personal names. This was done to expedite the loan application process with no thought given to the reasons why the property should be held in the name of your Child. • You received all bank correspondence regarding the loan. Your Child made payments to you to make repayments on the loan. • During the ownership period your Child has resided in the property and has been responsible for all holding and running costs of the property, including: - mortgage repayments on the loan - rates and taxes - property repairs, maintenance and improvements - electricity and gas. • You have advised that you occasionally provided additional finance support your Child. • Your Child has requested that the property be transferred into their name. • No professional or legal advice was sought at the time the property was purchased. Your Child is concerned that upon your deaths the property may be deemed part of the estate assets.

Relevant legislative provisions: Income Tax Assessment Act 1997 Part 3-1 | Income Tax Assessment Act 1997 Part 3-2 | Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 subsection 104-55(1) | Income Tax Assessment Act 1997 section 106-50 | Income Tax Assessment Act 1997 section 108-7 | Income Tax Assessment Act 1997 subsection 116-20(1) | Income Tax Assessment Act 1997 section 116-30 | Income Tax Assessment Act 1997 Division 115

Reasons for decision: Detailed Reasoning - Capital gains tax: Section 102-20 of the ITAA 1997 provides that a capital gain or capital loss results from a CGT event occurring. The most common CGT event, event A1, occurs under section 104-10 of the ITAA 1997 when there is a change in ownership of a CGT asset. Property is a CGT asset under section 108-5 of the ITAA 1997. Under subsection 104-10(1) of the ITAA 1997 CGT event A1 happens if you dispose of a CGT asset, however, subsection 104-10(1) 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. Section 108-7 of the ITAA 1997 treats individuals who own a CGT asset as joint tenants as if they each owned a separate CGT asset constituted by an equal interest in the asset and as if each of them held that interest as a tenant in common. It is recognised that an individual can be a legal owner of a property but have no equitable ownership. In these circumstances, it is the individual who has equitable ownership of a property who is subject to a CGT event upon sale. Under subsection 116-20(1) of the ITAA 1997, your capital proceeds from a CGT event includes the total of the money you have received, or are entitled to receive, in respect of a CGT event happening. Where on the disposal of an asset no money or property is received, the market value substitution rule contained in section 116-30 of the ITAA 1997 generally applies, such that you are taken to have received the market value of your ownership interest in the property at the time the CGT event occurs. If you sell, transfer or gift property to family or friends for less than it is worth, you'll be treated as if you received the market value of the property for CGT purposes. You use the market value of a property to calculate your CGT if both of the following are true: • what you received was more or less than the market value of the property • you and the new owner were not dealing with each other at arm's length. This is called the 'market value substitution' rule. Under Division 115 of the ITAA 1997, an entity may be eligible for a discount on CGT assets where they meet the relevant criteria, including holding the asset for longer than 12 months. Accordingly, when applying the CGT provisions on the sale of property, ownership must be considered. | Detailed Reasoning - Legal and equitable ownership: A person's legal interest in a property is determined by the legal title to that property under the property law legislation in the State or Territory in which the property is situated. In some cases, it is possible for legal ownership to differ from equitable, also known as 'beneficial' ownership. An individual may hold a legal ownership interest in a dwelling for another individual in trust. The Commissioner's position, as stated in paragraphs 41 and 42 of Taxation Ruling TR 93/32 Income tax: rental property - division of net income or loss between co-owners , is that there are extremely limited [emphasis added] circumstances where the legal and equitable interests are not the same, and that there is sufficient evidence to establish that the equitable interest is different from the legal title. Although TR 93/32 broadly deals with the division of rental income or loss between co-owners, it outlines the Commissioner's approach to considering whether legal and equitable ownership align. TR 93/32 states that capital gains or losses are divided on the same basis as net income or loss where there is a difference between legal and equitable ownership. As such, the Commissioner requires the same standard of evidence to establish that the beneficial ownership is different to the legal title in any relevant property dealings or transactions. This evidence ordinarily includes: • contemporaneous documentation that clearly shows the parties' intentions at the time the property was purchased, and • documentation that clearly shows that the parties treated the property in accordance with those intentions during the ownership period. Gibbs CJ in Muschinski v. Dodds [1985] HCA 78 ( Muschinski ) explained the relevance of contemporaneous evidence required to establish a trust over property between two parties: Where both transferees have contributed to the purchase money, the intentions of both are material, but where only one has provided the money it is his or her intention alone that has to be ascertained. The evidence admissible to establish the intention of the real purchaser will comprise "the acts and declarations of the parties before or at the time of the purchase... or so immediately thereafter as to constitute a part of the transaction" ( Charles Marshall Pty. Ltd. v. Grimsley [1956] HCA 28; (1956) 95 CLR 353, at p 365). In relation to evidence of a trust arrangement, the following should also be noted: • contemporaneous evidence includes any documents such as emails, diary entries, bank documents, correspondence with third parties involved in the transaction, etc., that were created at the time of the property's purchase, • where there is little or no contemporaneous evidence of intention and the terms of an arrangement, formal documents prepared many years after a property was purchased will be of little probative value, and • the evidence must be unambiguous. In the absence of clear and compelling evidence to the contrary, the property is considered to be owned by the people registered on the title. | Detailed Reasoning - Express Trust: An express trust is one intentionally created by the owner of property to confer a benefit upon another. It is created by express declaration, which can be affected by some agreement or common intention held by the parties to the trust. For an express trust to be created it is necessary that there is certainty of the intention to create a trust, subject matter and the object of the trust. While trusts can be created orally, all State Property Law Acts contain provisions that preclude the creation or transfer of interests in land except if evidenced in writing. | Detailed Reasoning - Resulting or implied trusts: On the purchase of real property, a resulting trust may arise where the legal title that vests in one or more of the parties does not reflect the respective contributions of the parties to the purchase price. A resulting trust arises by operation of law and falls into two broad categories. One such category is where someone purchases property in the name of another ( Calverley v Green 56 ALR 483) ( Calverley v Green ). A trust is presumed in favour of the party providing the purchase money. If an individual purchases and then pays for a property, but legal title is transferred to another person at their direction, the presumption of a resulting trust arises - the property is held in trust for them. The law presumes that the purchaser, as the person providing consideration for the purchase intended to retain the beneficial interest, although the legal interest is in the other's name. The presumption of resulting trust can, however, be rebutted by the presumption of advancement. | Detailed Reasoning - Presumption of advancement: The presumption of advancement is an equitable principle in which a person puts property in the name of another person with whom they have a close familial relationship. The presumption only applies to transfers and purchases made by people who stand in particular relationships, including parents from parents to their children. Under the presumption of advancement, the property is transferred with the intention of transferring both the beneficial interest in the property as well as the legal title. The parties hold their equitable interests in the property in the same proportions as their legal interests. Furthermore, in the absence of evidence to the contrary, the presumption of advancement effectively rebuts the presumption of resulting trust, in which case the onus upon the advancer to provide evidence that a trust was in fact created in relation to their contribution to the purchase of the property. | Detailed Reasoning - Constructive Trusts: A constructive trust is a trust imposed by operation of law, regardless of the intentions of the parties concerned. It applies whenever equity considers it unconscionable for the party holding title to the property in question to deny the interest claimed by another. The existence of a constructive trust is dependent upon the order of the court. | Detailed Reasoning - Bare trusts: 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, as the beneficiary remains absolutely entitled to the assets of a bare trust. If a beneficiary is absolutely entitled to a CGT asset as against the trustee of a trust, the CGT provisions apply to an act done by the trustee, as if it were an act done by the beneficiary. | Detailed Reasoning - Meaning of 'absolutely entitled': The Commissioner's views on the meaning of the words "absolutely entitled to a CGT asset as against the trustee of a trust" as used in the CGT provisions are set out in Draft Taxation RulingTR 2004/D25 Income tax: capital gains: meaning of the words 'absolutely entitled to a CGT asset as against the trustee of a trust' as used in Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997. There was no written trust when the Property was purchased or a resulting trust, therefore there is no absolute entitlement to the Property. | Detailed Reasoning - Gifts: The fundamental principles governing equity's approach to gifts of land are generally the same as for gifts of personal property and are expressed in the familiar maxims, 'equity will not assist a volunteer' and 'equity will not perfect an imperfect gift'. Where the donor has intended to transfer legal title but has not succeeded in doing so, equity will not assist by regarding the statement of intention to make a gift as a declaration of trust. In relation to gifts of land under the general law, as conveyance at law requires the execution of a deed and as this involves the donor personally, there is no gap between the time at which everything necessary for the donor to do is complete and the time when the gift is complete at law. A Court of Equity will not treat an imperfect gift as if it were a declaration of trust. Anning v Anning (1907) 4 CLR 1049. In such a case the property intended to be dealt with remains the property of the purported donor. Taxation Ruling TR 2005/13 Income Tax: tax deductible gifts - what is a gift : | Detailed Reasoning - Transfer must occur: 61. The making of a gift to a deductible gift recipient (DGR) involves the transfer of money or property to that DGR: section 30-15 of the ITAA 1997. In the simplest cases this involves the delivery of money (cash, cheque or electronic transfer of funds) or goods to the DGR. 62. In each case it is necessary to ascertain whether a transfer has occurred, what property has been transferred, and when the transfer took place. This is to ensure that ownership of identifiable property has been divested and has been transferred to the DGR (c.f., Re Rose (dec'd); Rose v. Inland Revenue Commissioners [1952] 1 All ER 1217). | Detailed Reasoning - 63. In Milroy v Lord, Turner LJ said that for a gift to be valid and effectual, the giver:: must have done everything which according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him. | Detailed Reasoning - Mortgage Repayments: Calverley v Green confirms that mortgage repayments are not a component of the purchase price of a property for the purposes of a resulting trust. Mason and Brennan JJ state at paragraph 7: It is understandable but erroneous to regard the payment of mortgage instalments as payment of the purchase price of a home. The purchase price is what is paid in order to acquire the property; the mortgage instalments are paid to the lender from whom the money to pay some or all of the purchase price is borrowed. As this authoritative statement confirms, only the contributions to the sum paid from the purchaser to the vendor of the property represent the purchase price of a property. Therefore, the repayment of mortgage instalments cannot be included as components of purchase price leading to the presumption of a resulting trust. While in theory it is possible for an implied trust to exist over property in other circumstances than a resulting trust, in practice the Commissioner will not accept the contention that an implied trust has arisen without compelling contemporaneous evidence to support the argument. However, the Commissioner will accept the existence of an implied trust when it has been constructed by the order of the court. The Commissioner's view is supported by the decision in Koprivnjak , which firstly provides a contemporary reaffirmation that mortgage repayments are not a component of the purchase price of a property, and secondly indicates that, where the presumption of advancement applies and the parent is making mortgage repayments to a property owned by their child, the courts do not consider mortgage repayments to be evidence which supports the inference of any sort of trust over the property. | Detailed Reasoning - Application to your circumstances: The Commissioner's starting point is that legal and equitable interests are equivalent unless there is sufficient evidence to demonstrate that the equitable interest varies from legal interest. There is no contemporaneous evidence to support your Child's equitable ownership of the Property at the time of purchase. No formal trust deed or any written agreement was entered into between you, and your Child regarding the equitable ownership. You have advised that your Child was not in a financial position to contribute to the purchase price of the property. Regardless of who made the mortgage repayments, the repayments do not represent a component of the purchase price ( Calverley v Green (1984) 155 CLR 242, at 257). Mortgage payments can be relevant but only as peripheral context which supports a broader set of facts including contemporaneous evidence of intentions of the parties at the time of acquiring the property. In the absence of contemporaneous evidence from the time the property was purchased, this peripheral evidence is not sufficient to demonstrate that a trust was established over the property when it was purchased in 19YY. Without contemporaneous documentation it is not possible to identify what the terms were, whether any contingencies existed, and what point, if any, your Child was the beneficial owner of the property. You advised that you had not thought-out or planned the proposition for purchasing the Property and the name on the title, due to the immediate needs of your Child and your grandchildren. You were advised by the bank and conveyancer to purchase the title in both your names. For CGT, an inter vivos gift of property, or a disposal and acquisition between parties not dealing with each other at arm's length, constitutes the disposal of the property by the transferor and the acquisition of the property by the transferee for a consideration equal to the market value of the property. If no payment is received from the CGT event, that is transferring the property to your Child, the market value of the Property is taken to be the amount you would have received if the property was sold at arm's length. The market value is worked out at the time of the CGT event, that is the date of transfer. The Property was not provided for in either of your Wills, with all assets are to be distributed to the surviving partner, and in the event of death of both parties, the estate is to be equally divided between your children. You have not turned your mind to how the Property would be distributed upon your deaths. If it was your intention to give the Property to your Child then adequate provisions would have been written into your Wills. You have stated that your Child held control over the property and under their instructions the property would have been sold. Although we accept you could have sold the property at the request of your Child, you would not be obligated to do so as you were the legal and equitable (beneficial) owners of the property, as registered on the property title. Therefore, we do not consider your Child held control over the property as you contend. | Detailed Reasoning - Bare trust and absolute entitlement: You also advised that the Property was held on bare trust for your Child. For a bare trust to have been established over the Property, you must have had no interest in the Property other than to transfer legal title of the Property into your Child's name at their request, or otherwise dealt with as per their instructions. The State's Property Act 19YY provides that you cannot create or transfer an interest in land unless it is done in writing, signed by the person creating or transferring it, or by their lawfully authorised agent (whose authority must also be in writing), or unless the interest arises by a will or by operation of law. Any declaration of trust relating to land, or to an interest in land, must be evidenced and proven in writing, signed by someone who is legally able to make such a declaration, or by their will. If someone wants to dispose of an existing equitable interest or trust, it must be done in writing, signed by the person making the disposition or their lawfully authorised agent (authorised in writing), or by their will. Therefore, in accordance with the State's Law of Property Act 19YY , to be successful in having an express/bare trust, it must be evidenced through writing. Lastly, your Child did not have the financial means to obtain a loan. You obtained a loan and provided the settlement funds, to purchase the Property for your Child and grandchildren to live. Your names, and not your Child's, were on the loan documents, and you were responsible for the loan repayments, and not your Child. The documents you have provided do not support a bare trust arrangement. Absolute entitlement does not apply because there is no trust. We accept that you have not directly benefited from the Property, but you have instead exercised your ownership rights by providing a home for your Child to live, with a continuous use and enjoyment of the Property. | Detailed Reasoning - Conclusion:: We consider that you held both the legal and equitable ownership in the Property and that your Child held no equitable ownership or control over the Property. If you decide to transfer the Property to your Child, a CGT event A1 will occur. As you have owned the Property for longer than 12 months you are entitled to the 50% CGT discount under section Division 115 of the ITAA 1997.