Private ruling: CGT - legal v equitable egal v equitable
Date of advice: 22 October 2025
Published: 8 December 2025
Ruling period: 30 June 20XX
Date scheme commenced: DDMMYY

Ruling: Q1: Can the capital gains from the sale of the property be disregarded | A1: No You are considered to have held both a legal and equitable ownership interest in the property and will be required to pay capital gains on sale of the property in accordance with Section 102-20 of the Income Tax Assessment Act 1997

Relevant facts and circumstances: On DDMMYY you and Persons A & B purchased a property. On DDMMYY just after settlement (DDMMYY) you and Persons A & B moved into the property. The total cost of the property was: • Price: $XX • Deposit: $XX • Balance: $XX Persons A & B made the initial deposit of $XX and required a bank to loan them the balance of $XX Persons A & B owned another property at the time of applying for the bank loan, the property valuation did not provide enough equity for approval of the loan. Persons A & B were unable to obtain a bank loan so they asked you to apply for the loan with them so that your income could be used to secure the loan and repayments. Due to this you were also added to the property title. The property was Persons A & B main residence until it sold in 20XX. You lived in the property with Persons A & B from DDMMYY until you married in 20XX and purchased your marital home in MMYY. You resided in the property rent and board free never contributing to any of the day-to-day costs. Persons A & B sold their other property shortly after purchasing the new property and used the sales proceeds to reduce the new home loan. Due to Persons A & B age they wanted to downsize, and the property was sold in MMYY, with settlement completed in MMYY. You did not receive any of the proceeds of the sale

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 118-130

Reasons for decision: Summary: Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you make a capital gain or loss as a result of a CGT event occurring to a CGT asset in which you have an ownership interest. For this reason, it is important to establish who is the owner of a CGT asset at the time a CGT event occurs. Subsection 104-10(1) states that a CGT event A1 happens if you dispose of a CGT asset. Under Section 104-10 (2) of the ITAA 1997 you dispose of a CGT asset when you either enter into a contract for its disposal, or where no contract exists, when the change of ownership occurs. A change of ownership does not occur if you dispose of legal ownership but continue to be the beneficial owner. Section 104-10 (4) of the ITAA 1997 states what constitutes a capital gain or capital loss from the disposal of your CGT asset. If you are entitled to receive the capital proceeds from a CGT event but direct those proceeds to another person, you are still taken to have received those capital proceeds. | Detailed Reasoning - Legal and beneficial ownership: The ATO considers that there are extremely limited 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. A person's legal interest in a property is determined by the legal title to that property under the property law in the State or Territory in which the property is situated. Where it is asserted that the beneficial ownership and legal ownership of a property are not the same, there must be evidence to show that the legal owner holds the property in trust for the beneficial owner. Relevant evidence includes information that evidences the intentions of the parties at the time the property was purchased or transferred from one legal owner to another, and evidence of contributions made by the parties towards the purchase price. Taxation Ruling TR 93/32 Income tax: rental property - division of net income or loss between co-owners (TR 93/32) contains guidance on the issues involved where the equitable interest in a property may not follow the legal title. As stated in TR 93/32 paragraphs 38 to 41, It has been said that if the equitable interest does not follow the legal title, there is some basis for the profit/loss to be distributed on the equitable and not the legal basis. | Detailed Reasoning - Express trust: An express trust is one intentionally created by the owner of property in order 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 - 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. As noted by Gibbs CJ, in Calverley v Green [1984] HCA 81 :(Calverley v Green case). A trust is presumed in favour of the party providing the purchase money. If an individual purchases and then pays for a property, but legal title is transferred to another person at their direction, the presumption of a resulting trust arises - the property is held in trust for them. 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 others name. However, there are instances where this application may not apply, including: • where there is evidence of a specific intention to hold beneficial interest in the property for another person who contributed no amount, or a lesser amount, towards the purchase price. • where the presumption of advancement applies • where a court orders that property is held on trust (not relevant to your circumstances). | Detailed Reasoning - Presumption of advancement: The presumption of advancement is an equitable principle where a person puts property in the name of another person with whom they have a close familial relationship. The presumption only applies to transfers and purchases made by people who stand in particular relationships, including from parents to their children. | Detailed Reasoning - Application to your circumstances: On DDMMYY you and Persons A & B purchased a property for $XX as joint tenants with equal shares. Soon after settlement DDMMYY you and Persons A & B moved into the property. To be able to purchase the property Persons A & B required your income to be able to obtain the home loan and use your income as serviceability to secure the loan and due to this you were included in the home loan application and property title. You did not have any formal written agreements or arrangements and at the time of purchasing the property your intention was to move into the property as your main residence and reside there until you were married and purchased your marital home. You resided in the property rent and board free until you married in 20XX and then in 20XX purchased your marital home in MMYY and moved into that property. As co-borrower on the loan you contributed to the purchase price of the property and not only obtained a legal interest but also an equitable ownership interest. You stated that you did not make mortgage repayments and that Persons A & B provided an additional amount to the purchase price by providing the deposit but did not provide evidence showing that it was paid by them. Regardless of who made the mortgage repayments, the repayments do not represent a component of the purchase price ( Calverley v Green (1984) 155 CLR 242, at [257]). Mortgage payments can be relevant, but only as peripheral context which supports a broader set of facts including contemporaneous evidence of intentions of the parties at the time of acquiring the Property. If Persons A & B did contribute more to the purchase price, the presumption of advancement would displace the presumption of resulting trust. As such, a third of the extra component of the purchase price contributed by Persons A & B would be advanced for your benefit and the equitable interest would remain in accordance with the legal title, as affirmed by the decisions in Bosanac and Koprivnjak . As you have not provided the Commissioner with sufficient evidence that you held your ownership share of the property on trust for Persons A & B when it was acquired, CGT event A1 will occur for you on your disposal of your interest under section 104-10 of the ITAA 1997, with both legal and equitable interest having been held by you at all times. Any capital gain or loss made from the sale of the property cannot be disregarded and must be included in your income tax returns in the relevant income year. As the property was held for over 12 months, you may be eligible to a 50% discount percentage, and you may be eligible to reduce the CGT cost base: | Detailed Reasoning - Second element: incidental costs of acquiring the CGT asset or that relate to the CGT event: There are 10 incidental costs you may have incurred when you acquired the asset or when the CGT event (such as selling or disposing of the asset) occurred. They are: • remuneration for the services of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant, or legal adviser - you can include the cost of tax advice as an incidental cost if the advice was provided by a recognised tax adviser and you incurred it after 30 June 1989 • costs of transfer • stamp duty or other similar duty • costs of advertising or marketing (but not entertainment) to find a seller or buyer • costs of making a valuation or apportionment to calculate your capital gain or loss • search fees for an asset - this includes fees to check land titles, but not travel costs to find an asset suitable for purchase • cost of a conveyancing kit (or a similar cost) • borrowing expenses, such as loan application fees and mortgage discharge fees • expenses incurred as a direct result of your ownership of a CGT asset ending. This includes termination and exit fees • expenses by the head company of a consolidated group where the expense - is to an entity that is not a member of the group - reasonably relates to a CGT asset held by the head company - is incurred because of a transaction between members of the group.