Private ruling: Beneficial ownership vs legal ownership
Date of advice: 12 March 2024
Published: 22 April 2024
Ruling period: 30 June 20XX
Date scheme commenced: XX XXX 20XX

Ruling: Q1: Will XXX have a capital gains tax (CGT) A1 event on the transfer of the property? | A1: No. CGT A1 event will not apply when the property XXX is transferred to XXX and XXX. Although XXX was the legal owner of the property, along with XXX, from when the property was purchased, at no time was XXX the beneficial owner of the property. XXX and XXX were the beneficial owners of the property.

Relevant facts and circumstances: XXX and XXX (the "Parents") are in their XXs and both are retired from the workforce. The Parents wanted to purchase a property at XXX (the Property). The Parents approached a bank for finance. The bank advised the Parents that they would not lend them the funds to purchase the property. The bank advised that they had reached their retirement ages and did not have the income to support the loan repayments. XXX and XXX (the Family) offered to borrow the funds from the bank to purchase the Property for XXX Parents. The parties orally agreed that the Parents would make all the loan repayments and provide the deposit for the Property. The agreement was such that the house belonged to the Parents and that the Family were owners "in name only". The Parents intended for the property to be their main residence. The parties intended for the Property to be in the names of XXX, XXX and XXX (their biological child). XXX was not going to be registered on the Certificate of Title. No written agreement was entered into between the Parents and the Family to acknowledge that the Property was legally owned by the Parents. As mentioned above, a verbal agreement was agreed to by the parties regarding the Property's ownership. The Family in an email to the bank manager, with the subject 'Parent's money', advised that 'the Parents' were still progressing with the intention to purchase the property in our name. The bank required XXX financials before the loan could be approved, and as a borrower XXX also needed to be registered on the Certificate of Title. The bank manager advised that as XXX is a director of a company and to protect the Parents' asset (the Property), the ownership in the Property should be a minimum holding. An email from the Family to the tax agent states that we are 'buying a house in our name for Mum and Dad and the bank needs our financials for the loan approval'. On the basis of the oral agreement, the Parent's deposited $XXX into an account in the name of the Family, as the deposit for the Property. The loan was approved to the Family. The bank manager advised that the Parents could not be registered on the Certificate of Title because they were not borrowers. Email from the Family to the bank manager advised they had made an offer on the Property, with the subject 'Parent's house'. The Property was settled on XX XXX 20XX. The Certificate of Title for the Property was registered, as per the bank manager's advice, with XXX owning 99% and XXX as a 1% owner. All rates and expenses for the Property have been paid by the Parents since the Property was settled. The Parents have registered on the electoral roll, and drivers' licences at the Property's address. Electricity and telephone accounts are received at the Property's address. The Family do not live at XXX, they have their own home where they reside. The Parents have not paid rent or asked the Family to pay for any expenses on the Property. On XX XXX 20XX the Parents won $XXX receiving the winnings on XX XXX 20XX. On XX XXX 20XX the Parents transferred $XXX into the loan account, held in the name of the Family, to discharge the mortgage on the Property. The Certificate of Title was not changed to the Parents after the mortgage was discharged on XX XXX 20XX. The parties now wish for the Family to transfer the Property to the Parents.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10