Private ruling: Capital Gains Tax on the disposal of a property owned by you but beneficially owned by a relative
Date of advice: 24 September 2018
Published: November 2018
Ruling period: Year ending 30 June 2019
Date scheme commenced: 01 July 2018

Ruling: Q1: Are you required to include a capital gain made on the disposal of a property, in your income tax return? | A1: No Under section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997), an entity will make a capital gain or a capital loss if a capital gains tax (CGT) event happens to a CGT asset. Taxation Ruling TR 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 paragraph 141 provides guidance that a beneficiary that is absolutely entitled to a CGT asset as against the trustee will be the relevant taxpayer if a CGT event happens to the asset. This is the impact of section 106-50 of the ITAA 1997 which provides that an act done by a trustee in relation to an asset is taken to have been done by the beneficiary that is absolutely entitled to the asset. In this case, we accept that you were not the beneficial owner of the property and purely held the title on behalf of your child who is absolutely entitled to the property. Your child has lived in the property and used it as their main residence. They paid the majority of the purchase price of the property, serviced the loan, and paid the running costs of the property. Any capital gain from the sale of the property would not be assessed to you.

Relevant facts and circumstances: Your child received a compensation payment for a value of $X. You purchased a property in trust for your child to reside in. To obtain a mortgage for the shortfall of $X the finance institution required the property to be in your name. The property was purchased as the principal place of residence of your child with them paying the majority of the cost. The property has never been treated as an investment property; at times family members have resided at the residence contributing to maintenance costs. Your child has not had another main residence. They serviced the loan and met the running costs including paying the rates and utilities. The property is being sold.

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