Private ruling: Capital Gains Tax
Date of advice: 13 December 2017
Published: May 2018
Ruling period: Year ending 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Will the sale of the property result in a capital gains tax (CGT) event for you? | 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 CGT event happens to a CGT asset. CGT event A1 occurs when a CGT asset is disposed of. An individual can be a legal owner but have no beneficial ownership in an asset. It is the beneficial owner that will have a CGT event upon sale of a CGT asset. In some cases, an entity may hold a legal ownership interest in property for another individual in trust. In your case, you have legal ownership in the property however were not the beneficial owner. Your relative was the beneficial owner of the property. You will not have CGT consequences as a result of the sale of the property. Further information on beneficial ownership can be found in Taxation Ruling IT 2486 and Taxation Determination TD 92/106.

Relevant facts and circumstances: A property (Property A) was acquired after 20 September 1985 and was the main residence of your relative since acquisition. Your relative was not able to secure finance with their bank for the purchase of Property A on their own. You agreed to provide a guarantee in respect of any loan by the bank to your relative. You and your relative were informed by the bank that, even such a guarantee, a mortgage loan to your relative only, would not be in accordance with the bank’s lending criteria at the time. The bank insisted that, in addition to you providing such a guarantee, their lending criteria would only be satisfied if you were also registered on the Title along with your relative. The purchase of Property A was partly funded by the sale of another residence (Property B) which was solely owned by your relative. Both Property A and Property B settled on the same day. You held no beneficial interest in property A and the capacity on which that you were named on the title was as trustee for your relative who was the sole beneficial owner. You did not contribute any portion of the purchase price to Property A. All other outgoings related to Property A, for example council rates and water were paid by your relative. Property A sold at auction with the contract signed in September 20XX and the settlement occurred in December 20XX. You had no interest in, or entitlement to, any of the net sale proceeds at settlement. There are written statutory declarations and declarations of trust which were formed between yourself and your relative to confirm that you, as a registered proprietor on the Title, held interest on trust for your relative.

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