Private ruling: CGT - Legal and equitable interest
Date of advice: 10 September 2025
Published: 3 November 2025
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will capital gains tax (CGT) event A1 happen to you when you transfer your legal ownership of the property to your relative? | A1: Yes. | Q2: Is your ownership interest in the property limited to X% of its value on the basis that a resulting trust arose in favour of your relative in respect to the contribution they made to the purchase price? | A2: Yes.

Relevant facts and circumstances: You entered into an arrangement with your relative to purchase a dwelling in your own name for your relative to live in. There were two main interlinked reasons for purchasing the dwelling in your name only: • Your relative didn't want an asset in their name because they had previously lost assets from previous broken relationships, and • It was difficult at the time for your relative to obtain a loan in their own name due them having with unsteady work. You entered into a contract to purchase the dwelling (the Property) for $X with a required deposit of $X. Your relative has lived in the Property as their main residence for your entire ownership period. You have never lived in the Property or derived income from the Property. You took out a mortgage loan of $X in order to acquire the Property. The loan repayments are debited from your bank account. Throughout the loan period, your relative has transferred the required amounts to your bank account in order for you to make the loan repayments. The loan has not yet been repaid. Your relative paid you the $X purchase deposit from their bank account. Your relative also paid the remaining cash required to complete the purchase of $X plus the required fees of $X from their bank account. Your solicitor sent a letter to your relative attaching a letter from your lender regarding the purchase of the Property including associated establishment costs and settlement requirements. You have provided a copy of a fax dated XX 20XX from you to your relative in relation to the purchase which includes references to: • building insurance of $X to be taken out, • the initial amount of the loan repayments your relative needed to pay, and • your relative needing to pay the various loan establishment costs totalling $X. You took out buildings insurance on the Property in your name and your relative paid the premium. Your relative took out contents insurance a few years later. Your relative has paid all the holding and maintenance costs in relation to the Property. You are now going to transfer the title of the Property to your relative.

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

Reasons for decision: Summary: Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a capital gain or capital loss results from a CGT event occurring. The most common CGT event, event A1, occurs under section 104-10 of the ITAA 1997 when there is a change in ownership of a CGT asset. As such, CGT event A1 generally occurs where the legal interest in a CGT asset changes. Legal interest in a property is determined by the legal title to the property under the property law legislation in the state or territory in which the property is situated. An individual can be a legal owner but have no equitable (or beneficial) ownership of an asset. This will ordinarily occur where the property is held on trust. To establish occasions where legal and equitable ownership are not the same, there needs to be evidence to rebut the standard presumption that legal and equitable interests are the same. The Commissioner's position, as stated in paragraphs 41 and 42 of TR 93/32 Income tax: rental property - division of net income or loss between co-owners (TR 93/32), is that there are extremely limited (emphasis added) circumstances where the legal and equitable interests are not the same, and that there is sufficient evidence to establish that the equitable interest is different from the legal title. In the absence of clear and compelling evidence to the contrary, the property is owned by the person registered on the title. This evidence ordinarily includes: • contemporaneous documentation that clearly shows the parties' intentions at the time the property was purchased, and • documentation that clearly shows that the parties treated the property in accordance with those intentions during the ownership period. Gibbs CJ in Muschinski v. Dodds [1985] HCA 78 (Muschinski) explained the relevance of contemporaneous evidence required to establish a trust over property between two parties: Where both transferees have contributed to the purchase money, the intentions of both are material, but where only one has provided the money it is his or her intention alone that has to be ascertained. The evidence admissible to establish the intention of the real purchaser will comprise "the acts and declarations of the parties before or at the time of the purchase... or so immediately thereafter as to constitute a part of the transaction" ( Charles Marshall Pty. Ltd. v. Grimsley [1956] HCA 28; (1956) 95 CLR 353, at p 365). For the Commissioner to accept that the equitable interest in a property is different from the legal title it is therefore necessary to provide sufficiently compelling evidence which demonstrates that a trust has been established between the legal owner/s and the owner/s in equity. Trusts may be of three kinds: express, constructive, or resulting. | Detailed Reasoning - Express trust: An express trust is one intentionally created by the owner of property to confer a benefit upon another. It is created by express declaration, which can be affected by some agreement or common intention held by the parties to the trust. For an express trust to be created it is necessary that there is certainty of the intention to create a trust, subject matter, and the object of the trust. While trusts can be created orally, all State property law Acts contain provisions that preclude the creation or transfer of interests in land except if evidenced in writing. | Detailed Reasoning - Constructive trusts: A constructive trust is a trust imposed by operation of law, regardless of the intentions of the parties concerned. It applies whenever equity considers it unconscionable for the party holding title to the property in question to deny the interest claimed by another. The existence of a constructive trust is dependent upon the order of the court. | Detailed Reasoning - Resulting or implied trusts: On the purchase of real property, a resulting trust may be presumed where the legal title that vests in one or more of the parties does not reflect the respective contributions of the parties to the purchase price. A resulting trust arises by operation of law and falls into two broad categories. One such category is where someone purchases property in the name of another ( Calverley v. Green [1984] HCA 81). If a resulting trust arises, the party, or parties, who hold the legal title is, or are, presumed to hold the property upon resulting trust in favour of those who contributed to its purchase cost. That is, the law presumes that the purchaser, as the person providing consideration for the purchase intended to retain the beneficial interest, although the legal interest is in the other's name. However, there are instances where this application may not apply. This is where the property is transferred to the purchaser's immediate family such as a spouse or a child. In such circumstances, the presumption of a resulting trust is replaced by the 'presumption of advancement'. The rebuttable presumption of advancement deems the purchaser to have prima facie intended to advance the interests of the family members (i.e. an absolute gift). | Detailed Reasoning - Application to your circumstances: The Commissioner considers that there are extremely limited circumstances where the legal and equitable interests differ and requires sufficient evidence to establish that the equitable interest is different from the legal title. In your circumstances, there is no constructive trust as there has been no court or tribunal hearing which determined a constructive trust is in existence. To establish the existence of any other type of trust, contemporaneous evidence is required to clearly show the intentions of you and your relative at the time the Property was purchased or that your relative contributed to the purchase price. In your case, we consider that there is insufficient contemporaneous evidence to establish that the equitable interests in the Property were different from the legal title to the extent that you held no equitable interest in the Property and merely held the legal ownership on trust for your relative. However, we do recognise that a resulting trust arose to the extent that you have been able to provide evidence of your relative's contribution of $X to the deposit. You did not enter into any type of formal trust arrangement by way of a documented agreement. Nor is there any type of documented agreement that clearly sets out the respective rights and responsibilities of you and your relative in relation to the Property, including, for example, what would happen in the event of the Property being sold and for what period of time the arrangement was to continue. We note that your relative lived in the Property, paid an amount towards the purchase deposit (you were able to provide evidence of your relative providing the $X deposit) plus fees, and transferred monies for the loan repayments to your bank account. You have also provided a copy of a fax and letter from the time of purchase that show that your relative was involved with the purchase. However, we consider that these facts are insufficient to rebut the standard presumption that the legal and equitable interests are the same, beyond your relative's X% contribution to the purchase price. You also borrowed $X to fund the majority of the purchase price via a mortgage over the Property. This is consistent with you being both the legal and equitable owner. Being the legal owner and mortgage holder evidences your control over the Property. For example, you could have sold the Property without any legal impediment should your relative have not been able to make the loan repayments to you. We also consider that repayments of a loan are not contributions to the purchase price of a Property as they happen after the purchase has been completed. We also note that you have not lived in the Property or derived any income from the Property during your ownership period. Although we accept that you have not directly benefited through your own immediate use and enjoyment of the Property, you have instead exercised your ownership rights by providing your relative with a degree of asset protection along with continued use and enjoyment of the Property. After fully evaluating the information you have provided, the Commissioner does not consider the equitable ownership of the Property differs from the legal title beyond the resulting trust that arises from your relative's X% contribution to purchase price. Therefore, CGT event A1 will happen to you when you transfer the title to the Property to your relative with your ownership interest being limited to X% of the value of the Property.