Private ruling: Legal vs beneficial ownership
Date of advice: 14 March 2022
Published: May 2022
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 March 20XX

Ruling: Q1: Will you have a capital gains tax event upon the transfer of your interest in Property B? | A1: No. Based on the facts, the Commissioner accepts that in your circumstances, you are not a beneficial owner of Property B as you have not contributed to its acquisition and have not contributed to its ongoing expenses.

Relevant facts and circumstances: You planned to acquire Property A. Your intention was for you to own and occupy the dwelling at Property A as your main residence, with Property A solely in your name. You have lived at the Property A since its acquisition and used the dwelling as your main residence. You provided that you and a relative have mutual agreement regarding the ownership of Property A, and another property, Property B. You did not contribute to the deposit of Property B. Property A was acquired a number of years ago. However, due to a lack of borrowing capacity available to you, the financial institution required that a co-borrower had to be co-owner and borrower in order to achieve the required loan amount. Your relative, was the co-borrower and was listed jointly appear on the Property A title and the mortgage for the loan to be approved. More recently, due to the lending policy with the bank, you were required to be listed as a co-borrower had to jointly appear on the Property B title for the loan to be approved. You have provided a letter from financing business explaining this requirement of the financier as your relative had previously assisted you to purchase a property, all lenders would not allow your relative to borrow enough in their name solely to purchase Property B. The deposit for Property B was individually paid by your relative. All the expenses, including rates and utilities, having been paid by your relative who will continue to occupy the dwelling. You co-own an investment property with your relative. You and your relative are now considering transferring your legal interests to each other so that you will solely own Property A, and your relative will solely own Property B.

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