Private ruling: CGT - legal v beneficial ownership
Date of advice: 14 April 2022
Published: July 2022
Ruling period: 30June 20x2
Date scheme commenced: 13 September 20XX

Ruling: Q1: Will the transfer of legal title of the property from Party B and Party C to Party A be a capital gains tax (CGT) event? | A1: No. Based on the facts, the Commissioner accepts that Party A was the beneficial owner of the property since its acquisition. Therefore, as only the legal ownership and not beneficial ownership are being transferred, no CGT event will occur.

Relevant facts and circumstances: Party A purchased a property with financial assistance from Party B and Party C. An agreement was entered into by Party B, Party C, and Party A, whereby Party B and Party C loaned an amount of money to Party A to finance the purchase of the property, and as security Party B and Party C retained legal ownership as title holders of the property until the loan was repaid or until they decide to release their security over the loan. This agreement is recorded in a signed explanatory note and confirmed in a witnessed statutory declaration. The property was purchased from a third party in an arm's-length transaction. Party A paid the deposit to the real estate agent trust account in two instalments, as shown on two transaction receipts. The balance of the purchase price of the property was advanced by Party B and Party C to Party A as an interest free loan. The real estate agent involved listed Party B and Party A as the property purchasers in a letter congratulating them on their decision to purchase the property. Party B and Party C retained legal ownership as title holders of the property as security over the loan. The purchase of the property was settled as shown on the settlement statement. Party B and Party C were registered on the title of the property as shown on the title transfer document. Party A has occupied the property continuously as their residence since settlement of the property. A repayment schedule shows that Party A has repaid the loan in accordance with the loan agreement. Party B and Party C have decided to transfer the property title to Party A before the loan is fully repaid and release their security over the loan.

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 109-5