Private ruling: CGT - legal vs beneficial ownership
Date of advice: 1 June 2022
Published: August 2022
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Did you have an ownership interest in the Property for CGT purposes at the time of its disposal? | A1: No

Relevant facts and circumstances: Your child (Person A) and their spouse (Person B) purchased a property (the Property). The Property purchase was financed with a loan of approximately $X. You lent Person A an amount of money to help them and their spouse purchase the Property. At the time Person A wasn't earning enough to service the loan and Person B had unpaid debts so their wages couldn't be used. You (Person C), your spouse (Person D) and Person A were registered as joint tenants on the Property title. You and Person D were also listed on the mortgage. You were advised to help Person A purchase the property in case their relationship with their spouse broke down. You never lived in the Property. Person A and Person B lived in the Property from the time of purchase until it was sold. All mortgage repayments were made by Person A. The Property was never rented out and you never received any monetary gains. You made an agreement that if Person A sold the Property then they would pay you back the amount you had loaned them or if they could refinance the loan, they would pay you back the amount you had loaned them. You paid the deposit from two bank accounts - a cheque from your bank account and the balance from another credit union account. You also broke a fixed term deposit with your bank to pay the balance and make some urgent repairs to the house. After the Property was purchased, a judgment was made against Person B relating to unpaid debts. The loan had to be increased to pay the debts. The Property was sold a short time ago. On completion of the sale, the loan amount was deposited back into your account.

Relevant legislative provisions: Income Tax Assessment Act 1992 section 102-20 | Income Tax Assessment Act 1997 section 104-10

Reasons for decision: Summary: As you were the legal owner but not the beneficial owner when the Property was disposed of, you did not have an ownership interest for CGT purposes. | Detailed Reasoning - Detailed reasoning: CGT event A1 occurs when there is a change in ownership of a CGT asset. However, CGT event A1 does not occur if there is only a change of legal ownership and not a change of beneficial ownership. You agreed to be a registered legal owner of the property, but without any expectation of having any elements of beneficial ownership of the property. You were not going to live in the property. You were not intending to and did not incur any expenses of ownership of the property, including mortgage payments. There was no intention for you to benefit from any future sale of the property. Based on the facts, the Commissioner accepts that in your circumstances, although you were a legal owner of the property, it was never intended for you to have any beneficial ownership of the property. It can be reasonably concluded that at time of change of legal ownership of the property, when you transferred your share of the property no change of beneficial ownership occurred. Therefore, at the time of disposal of the Property, you did not have an ownership interest in the Property for CGT purposes.

Question: Did you have an ownership interest in the Property for CGT purposes at the time of disposal?