Private ruling: CGT - legal vs beneficial ownership
Date of advice: 8 June 2022
Published: August 2022
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Do you have an ownership interest for CGT purposes at the time of removal of your name from the Property title? | A1: No.

Relevant facts and circumstances: Your child (Person A) and their spouse (Person B) were married in 20XX. They purchased a property (the Property) The Property was placed in your name and Person A's name as joint tenants. This was because Person B had received numerous threats against them and their family in connection with their employment. Person B does not appear on the property title or any of the utility bills for the property. Person B had all of their details supressed on government services. Person B was not linked in any paper or electronic trails to the address in which they resided with their family. You did not supply any financial aid to the purchase of the Property. You did not receive any rental income or financial benefit from being on the title. You never resided at the Property. Person A and Person B paid all duties and renovations in relation to the Property. In 20XX, the marriage between Person A and Person B ended. The Property is now to be sold and the proceeds divided between Person A and Person B. You wish to be removed from the Property title.

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

Reasons for decision: Summary: No. As you have a legal ownership interest but not a beneficial interest in the Property, at the time of removal of your name from the Property title, you will 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. 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 beneficial ownership. A beneficial owner is a person or entity who is beneficially entitled to the income and proceeds from the asset. An individual may hold a legal ownership interest in a dwelling for another individual in trust. Where it is asserted that the beneficial ownership and legal ownership of a property are not the same, there must be evidence to show that the legal owner holds the property in trust for the beneficial owner. Legal and equitable interests will not be the same where it is established that a resulting trust arose. Taxation Ruling TR 93/32 Income tax: rental property - division of net income or loss between co-owners (TR 93/32) contains guidance on the issues involved where the equitable interest in a property may not follow the legal title. However, as stated in TR 93/32, the Commissioner considers that there are extremely limited circumstances where the legal and equitable interests are not the same and that there needs to be sufficient evidence to establish that the equitable interest is different from the legal title. 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 are 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 the time of removal of your name from the Property title, no change of beneficial ownership will occur. Therefore, at the time of removal of your name from the Property title, you will not have an ownership interest in the Property for CGT purposes.