Private ruling: Capital gains tax
Date of advice: 25 July 2016
Published: August 2016
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Will you be liable to pay capital gains tax (CGT) when you transfer your ownership of the property? | A1: No.

Relevant facts and circumstances: You took ownership of a property in trust for another entity. You got a loan to payout the debt owing and the other entity has been paying off the loan. You have not received any benefit from owning the property. You now would like to put the property back into other entity's name.

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

Reasons for decision: Summary: CGT event A1 happens if you dispose of a CGT asset as per subsection 104-10(1) of the Income Tax Assessment Act 1997 (ITAA 1997). Subsection 104-10(2) of the ITAA 1997 provides that you dispose of a CGT asset if a change in ownership occurs from you to another entity, whether because of some act or event or by operation of law. 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 capital gains tax upon sale of the assets. In some cases, an entity may hold a legal ownership interest in property for another individual in trust. In this case, you took over ownership of the property in trust for another entity. The other entity has been paying off the property. We consider that although you hold the legal title to the property, you are not the beneficial owner. When you transfer the property to other entity there will be no change in the beneficial ownership of the asset. Therefore, a CGT event will not occur and consequently you will not be liable to pay any CGT on the transfer of the property.