Date of advice: 10 November 2016
Published: March 2017
Ruling period: Year ending 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you required to include 50% of the capital gain made on the disposal of the property in your income tax return for the 20XX-YY financial year? | A1: Yes

Relevant facts and circumstances: You and your parent purchased a property, each contributing half of the purchase price. You were registered on the title as the sole legal owner of the property. You did not intend to be the sole beneficial owner of the property. The property was your parent's main residence from the time of purchase until their death in the 20XX financial year. Your parent paid all expenses in relation to the property. You never occupied the property. You received no income from your parent's use of the property. In their will, your parent gave the residuary of their estate to you and your siblings in equal shares. The residuary included a 50% share in the property. The property is now under contract for sale. Relevant legislative provisions Income Tax Assessment Act 1997 section 102-20 Income Tax Assessment Act 1997 Section 104-10


Reasons for decision: Summary: You make a capital gain or capital loss if a CGT event happens to a CGT asset under section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997). Property is considered to be a CGT asset. Under section 104-10 of the ITAA, CGT event A1 occurs if you dispose of your ownership interest in a CGT asset. You dispose of that interest if a change of ownership occurs from you to another entity. The timing of the event is when you enter into the contract for the disposal or if there is no contract, when the change of ownership occurs. It is possible for legal ownership to differ from beneficial ownership. A beneficial owner is defined in Taxation Ruling IT 2486 and Taxation Determination TD 92/106. A beneficial owner is the person or entity who is beneficially entitled to the income and proceeds from the asset. A legal owner is the individual who has their name on the legal documents associated with the CGT asset, an example would be the title deed for a property. An individual can be a legal owner but have no beneficial ownership in an asset. It is the beneficial owner of a CGT asset that is liable for CGT upon sale of the asset. Where beneficial ownership and legal ownership of an asset are not the same, there must be evidence that the legal owner holds the property in trust. Where an individual purchases and pays for a property but legal title is transferred to another person at their direction, if that person is a stranger, the presumption of resulting trust arises and the property is held in trust for them. However where the property is transferred between spouses or from parents to children, the presumption of resulting trust is replaced by the presumption of advancement which deems the purchase to be prima facie intended to advance the interests of the family members (that is, an absolute gift). The consequence of the presumption of advancement being upheld is that the parties will hold their equitable interests in the property in the same proportions as their legal interests unless they can rebut the presumption of advancement. | Detailed Reasoning - Application to your circumstances: In your situation the presumption of advancement is rebutted on the following grounds: ● you provided half of the purchase monies and your mother provided the other half; ● your parent occupied the property at all times; ● your parent paid for all the household expenses; ● you received no income from the property; and ● your parent left a half share of the property in her will. Therefore it has been determined that a resulting trust did exist with regards to the property and the presumption of advancement is rebutted. You acted as trustee in relation to a half share in the property with your parent being the beneficiary. Accordingly, you will be liable for CGT on your half share of the property only.