Private ruling: Legal vs Equitable ownership - main residence exemption
Date of advice: 5 March 2026
Published: 20 April 2026
Ruling period: Year ending 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Will CGT Event A1 occur when you dispose of your interest in a property? | A1: Yes. | Q2: Will you be entitled to a partial main residence exemption in section 118-100 of the ITAA 1997 on the sale of the Property? | A2: Yes.

Relevant facts and circumstances: This ruling applies to Person A and Person B (jointly referred to as you). Acquisition of the Property On DD MM YYYY, Person C and Person D acquired a residential property (the Property) for approximately $XX. At that time, Person C and Person D directed that the Property be registered in your names as joint tenants. Person C and Person D provided the whole of the purchase price required to acquire the Property. You did not contribute any funds towards the purchase. Person C and Person D paid all costs associated with holding the Property, including rates and taxes. Person C and Person D have resided in the Property since its acquisition. The Property is currently estimated to have a market value of approximately $XX. Ownership On DD MM YYYY, improvements were made to the Property consisting of an extension to the rear of the dwelling, funded entirely by Person C and Person D at a cost of approximately $XX. You have exercised no control or discretion over the Property and have not contributed to any expenses or liabilities in relation to it. You have never declared or treated the Property as your own for legal, financial, or taxation purposes, nor have you used the Property as security for any loans. At the time the Property was acquired, you were dependants of Person C and Person D but have since moved out. Use and Occupancy of the Property The Property has never been rented, used to generate income, or used for any business purpose. Person C and Person D have resided at the Property continuously since DD MM YYYY, subject only to temporary absences for holidays. Person C and Person D do not own any other real property. The land associated with the Property does not exceed 2 hectares. Person C and Person D have used the entire land primarily for private residential purposes. Trust Deed On DD MM YYYY, Person C and Person D executed a bare trust deed (the Deed) under which you were appointed as trustees in respect of the Property. The terms of the Deed were as follows: • the Deed formally acknowledged the resulting trust that arose between the Trustees and the Beneficiaries in respect of the acquisition of the Property • the Deed recorded that, as a consequence of the resulting trust arising on the acquisition of the Property, the Trustees at all relevant times held the Property on an absolute bare trust for the Beneficiaries as joint tenants. • the Trustees were required to transfer the Property to the Beneficiaries in such manner as the Beneficiaries might direct and, in all other respects, to deal with the Property strictly in accordance with the lawful directions of the Beneficiaries. • the Beneficiaries agreed that the Trustees were entitled to be indemnified out of the Property, or out of any trust fund representing the proceeds of realisation of the Property (or any part thereof), in respect of any expenses incurred by the Trustees by reason of the Property being held in their names • the Trustees had no active management duties and no powers under the Deed, other than to transfer the Property to the Beneficiaries at their direction when called upon to do so • the Deed did not confer any discretionary powers on the Trustees. The Deed was not executed contemporaneously with the acquisition of the Property. Sale of Property The property is intended to be sold.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 108-5 | Income Tax Assessment Act 1997 section 108-7 | Income Tax Assessment Act 1997 subsection 104-10(1) | Income Tax Assessment Act 1997 subsection 104-10(2) | Income Tax Assessment Act 1997 section 118-100 | Income Tax Assessment Act 1997 section 118-185 | Income Tax Assessment Act 1997 section 118-190

Reasons for decision: Summary: CGT event A1 will occur on the disposal of your interest in the Property because you hold the legal title as joint tenants and, in the absence of contemporaneous evidence to the contrary, you are also taken to hold the equitable ownership. As there is insufficient evidence establishing that you held the Property solely as legal owners for Person C and Person D, the Commissioner would accept that equitable ownership follows legal title, giving rise to CGT event A1 on disposal. | Detailed Reasoning - Capital Gains Tax: Section 102-20 of the ITAA 1997 states that a capital gain or capital loss is made only if a CGT event happens to a CGT asset. An ownership interest in a property is a CGT asset under section 108-5 of the ITAA 1997. Section 108-7 of the ITAA 1997 treats individuals who own a CGT asset as joint tenants as if they each owned a separate CGT asset constituted by an equal interest in the asset and as if each of them held that interest as a tenant in common. Under Division 115 of the ITAA 1997, the owner of a CGT asset may be eligible for a discount on the capital gain incurred on the disposal of the asset where relevant criteria are met, including holding the asset for longer than 12 months. | Detailed Reasoning - Legal v Equitable Ownership: Under subsection 104-10(1) of the ITAA 1997 CGT event A1 happens if you dispose of a CGT asset, however, subsection 104-10(2) of the ITAA 1997 provides that a disposal of a CGT asset does not occur if there is only a change of legal ownership and no change of beneficial ownership. It is recognised that an individual can be a legal owner of a property but have no equitable (also known as beneficial) ownership. In these circumstances, it is the individual who has beneficial ownership of a property who is subject to a CGT event upon sale. 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 equitable 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 contemporaneous 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. We will assume where taxpayers are related, e.g., husband and wife, that the equitable right is exactly the same as the legal title. | 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, the trust's 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. In New South Wales, this is provided in paragraphs 23C(1)(b) and (c) of the Conveyancing Act 1919 (NSW) (Conveyancing Act): (1) Subject to the provisions of this Act with respect to the creation of interest in land by parol (a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person's agent thereunto lawfully authorised in writing, or by will, or by operation of law (b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by the person's will (c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same or by the person's will, or by the person's agent thereunto lawfully authorised in writing. Subsection 23C(2) states the following exemption to this rule: (2) This section does not affect the creation or operation of resulting, implied, or constructive trusts. Subsection 23C(2) of the Conveyancing Act consequently permits resulting, implied, or constructive trusts to be created without executing a written declaration of trust over real property. | Detailed Reasoning - Resulting or implied trusts: On the purchase of real property, a resulting trust may arise in situations where the legal title that vests in one or more of the parties does not reflect the respective contributions of the parties to the property's 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 56 ALR 483) ( Calverley ). 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 other person's 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 in which 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 parents from parents to their children. Under the presumption of advancement, the property is transferred with the intention of transferring both the beneficial interest in the property as well as the legal title. The parties hold their equitable interests in the property in the same proportions as their legal interests. Calverley v. Green outlines the following principles: • Where one person purchases property in the name of another, or in the name of himself and another jointly, it will be presumed that the first person did not intend the other to acquire a beneficial interest unless there is such a relationship between the persons as gives rise to a presumption of advancement. • The presumption of advancement may be rebutted by evidence of the actual intention of the purchaser at the time of purchase. If two persons have contributed to the purchase and the legal interest does not reflect the proportions of their contributions, the intentions of both parties at the time of purchase are important. • The onus of rebutting the presumption of advancement lies with the person who is considered as having gifted the property to another (usually the purchaser). Evidence is required that demonstrates that the purchaser did not intend the property to be a gift to the other party. In Australia, the case of in Bosanac v Commissioner of Taxation [2022] HCA 34 ( Bosanac ) sets precedent for the contemporary interpretation of the presumption in Australia. Their honours Kiefel CJ and Gleeson held that the principles underlying the presumption of advancement have continuing application, with an acknowledgement that the presumption may be seen as an absence of reason to presume that a [resulting] trust has arisen. Summarily, the principles contemplated in Bosanac confirm that where a husband or parent advances funds to purchase property in which the legal title is held in the name of the wife or child, it is presumed that the contribution of the advancer is intended to be for the benefit of the title holder. Furthermore, in the absence of evidence to the contrary, the presumption of advancement effectively rebuts the presumption of resulting trust, in which case the onus upon the advancer to provide evidence that a trust was in fact created in relation to their contribution to the purchase of the property. The decision in Koprivnjak v Koprivnjak [2023] NSWCA 2 ( Koprivnjak ) illustrates the application of the principles refined in Bosanac to the advancement of funds by a parent towards property in which legal title is held by their child. As well as confirming that the presumption of advancement will apply to rebut the presumption of resulting trust, Griffiths AJA expanded on the reasoning regarding the establishment of a resulting trust, stating that "[the advancing party] carrie[s] the onus of satisfying the Court on the balance of probabilities that: • [the advancing party] advanced money to the purchase price and costs of the property for the purpose of a resulting trust (emphasis added); and • [the advancing party] and [the legal title holder] had the common intention that [the legal title holder] would hold the property on trust for [the advancing party]. | Detailed Reasoning - Application to your circumstances: You are the registered proprietors of the Property as joint tenants, and therefore you each hold an equal CGT interest for CGT purposes. The Commissioner's published approach is that outcomes generally follow legal title, departing from that position only in limited cases where there is sufficient evidence showing that the equitable interest differs from the legal title. In determining whether such a departure is warranted, the critical issue is whether there is clear and persuasive evidence demonstrating that, at the time of acquisition of the Property, you held the Property solely as legal owners on trust for another party. The relevant intention is that which existed at the time legal title was placed into your names On DD MM YYYY. In this case, there is no contemporaneous documentary or other objective evidence demonstrating that, at the time the Property was acquired, there was a common intention that you would hold only legal title and that the equitable interest would vest in Person C and Person D. The Property was acquired with legal title intentionally registered in your names as joint tenants, and there is no evidence of any written agreement, declaration of trust, or other arrangement existing at or around the time of acquisition that evidences the existence of a trust relationship. Accordingly, absent persuasive evidence that you held title only as trustees, the Commissioner would accept that you hold the equitable interests in the Property consistent with your legal title. Although Person C and Person D provided the purchase monies, legal title was intentionally directed into the names of their children. In such circumstances, equity may presume that the transfer was intended as an advancement (gift) rather than that the children hold on resulting trust for the parents. The High Court has confirmed that the presumption of advancement remains part of Australian law. The question is determined by reference to intention and the objective circumstances at the time of acquisition. In the absence of evidence demonstrating that Person C and Person D intended to retain the equitable interest when legal title was placed into your names, the presumption of advancement operates to support the conclusion that the equitable interest vested in you in proportions consistent with your legal ownership. On the footing that the funds were advanced by parents and legal title was placed in the names of the children, the presumption of advancement supports the conclusion that the equitable interest vested in you in proportions consistent with your legal title (equal interests). The Commissioner requires sufficient evidence to accept that the equitable interest differs from legal title, and notes such cases are very limited. Here, the document described as a bare trust deed was executed on DD MM YYYY, XX years after acquisition, and therefore does not constitute contemporaneous evidence of intention at the time legal title was placed into your names. While NSW permits resulting or implied trusts to arise without a written declaration, the existence of a later executed document does not, of itself, establish that such a trust existed in fact from the time of acquisition. The decisive issue remains whether the evidence demonstrates that, at acquisition, there was a shared intention that you would hold only legal title and no equitable interest. Given the passage of time between acquisition and execution of the deed, and the absence of objective evidence contemporaneous with acquisition, the deed is afforded limited probative weight in establishing the requisite intention at that earlier time. On the basis of your stated position, and having regard to the Commissioner's evidentiary threshold, the available material does not sufficiently demonstrate that you held the Property solely as bare trustees such that the equitable interest lay elsewhere. | Detailed Reasoning - Question 2: Will you be entitled to a partial main residence exemption in section 118-100 of the ITAA 1997 on the sale of the Property? | Summary: You will be entitled to a partial main residence exemption in respect of the disposal of the Property. While you are taken to hold the relevant CGT interests in the Property and CGT event A1 will occur on disposal, the Property was your main residence for part only of the ownership period during which you resided there. As the Property was not your main residence for the entire ownership period, and you cannot continue to treat it as your main residence after you ceased to occupy it, only a partial main residence exemption applies, with the extent of the exemption determined under section 118-185 of the ITAA 1997. | Detailed Reasoning - CGT event A1 and relevant ownership interests: Because a capital gain or loss arises only when a CGT event happens, and land is a CGT asset, the sale of the Property would give rise to CGT event A1 in relation to your respective CGT interests. Each of you is treated as holding an equal CGT asset interest (as if tenants in common), and the relevant time for CGT event A1 is when you enter the contract for sale. As determined in Question 1, you are taken to hold the equitable interests in the Property consistent with your legal ownership. Accordingly, the Commissioner would treat you as the relevant owners for CGT purposes in relation to the disposal of the Property. For CGT purposes, the Commissioner considers that you hold the equitable interests in the Property, such that CGT event A1 on disposal is taken to happen to your respective equal CGT interests. | Detailed Reasoning - Partial & main residence exemption: Division 118 of the ITAA 1997 provides an exemption from CGT for a dwelling that is a taxpayer's main residence. Section 118-100 of the ITAA 1997 identifies the availability of the main residence exemption generally. A full exemption applies only where the dwelling was the taxpayer's main residence for the entire ownership period. Where a dwelling was the taxpayer's main residence for part only of the ownership period, section 118-185 of the ITAA 1997 provides for a partial main residence exemption. Under section 118-185 of the ITAA 1997, the capital gain arising from the disposal of a dwelling is apportioned by reference to the number of days during the ownership period that the dwelling was not the taxpayer's main residence. Where the dwelling was not used to produce assessable income, no adjustment under section 118-190 of the ITAA 1997 is required. | Detailed Reasoning - Application to your circumstances: In this case, there was a period during the ownership of the Property during which you occupied the Property in a manner capable of satisfying the requirements of a main residence for CGT purposes. That occupation, to the extent it occurred, ended when you stopped living in the Property, and the Property was not subsequently re-established by you as your main residence. After you stopped living in the Property, the Property continued to be occupied by Peter and Peggy. However, their occupation does not of itself result in the Property being treated as your main residence for CGT purposes, as the main residence exemption depends on the occupation and use of the dwelling by the owner. The Property was not rented, used to produce assessable income, or used for any business purpose at any time. Accordingly, the Property was your main residence for part only of the ownership period. Having regard to: • the period during which you occupied the Property as your main residence • the time you stopped living in the Property • the absence of any re-establishment of the Property as your main residence thereafter • the absence of any income-producing use of the Property section 118-185 of the ITAA 1997 applies to allow a partial main residence exemption in respect of any capital gain arising on the disposal of your respective interests in the Property, with the extent of the exemption to be determined by reference to the proportion of the ownership period during which the Property was your main residence.