Private ruling: CGT - beneficial and legal ownership of a property
Date of advice: 14 June 2022
Published: August 2022
Ruling period: Income year ending 30 June 20XX | Income year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is Capital Gains Tax (CGT) payable on the transfer of title from Person A to Person B on the property (The Property)? | A1: No. A resulting trust exists and Person A held the property for Person B. Person B is considered the beneficial owner. Section 106-50 of the Income Tax assessment Act (ITAA) 1997 applies, in that, Person B is absolutely entitled to the property. Therefore, when the transfer of the title from Person A to Person B occurs no capital gains tax (CGT) will apply to Person A.

Relevant facts and circumstances: In 20XX, Person A purchased a residential property (the property) for Person B. Person A purchased the property on the request of Person B. Person B provided all the purchase price and costs and expenses associated with the purchase of the property. The property was purchased with a deposit paid by Person B and the balance of purchase monies was paid by Person B to Person A.There is no dispute between Person A and Person B about the property being purchased with money provided by Person B as their benefically-owned money nor that the property has been held on a resulting trust for Person B by Person A since its purchase. Person B has used the property as their main residence. A dispute arose between Person A and Person B about the resulting trust over the property (the Trust). The details of this dispute have not been disclosed. The dispute was ultimately resolved by the parties entry into a deed of trust entitled 'Declaration of Trust for a Purchaser' in 20XX made between person A as 'the Trustee' and Person B as 'the beneficiary' A copy of the Trust Deed was provided. You state "The Trust Deed, athough called a 'Declaration of Trust for a Purchaser', is in substance a mere acknowledgment and confirmation of an existing fully-constituted resulting trust over the property on its proper interpretation" Trust Deed recitals A and B (recite the ingredients of a validly-constituted resulting trust) and clause 1 (acknowledging the existence of the resulting trust). In 20XX, correspondence was entered into between Person A and Person B's solicitors regarding the proposed transfer of title of the property from Person A to Person B. This is when Person B first sought a transfer of title to them from Person A. Person A refused to transfer title to the property to Person B for the intervening X years. The reason for that refusal has been Person A's reliance on legal advice. In 20XX, Person A filed a Summons with the Supreme Court in which they sought inter alia an order for the sale of the property as its trustee for sale, an order for the payment of liabilities of the Trust incurred since his acquisition of the property and orders and directions for the sale of the property under a power of sale as the trustee for sale, and orders for an accounting for the proceeds of sale to Person B as Beneficiary of the Trust (the summons) in a proceeding in the Supreme Court (Supreme Court Proceedings). The Summons was filed in accordance with judicial advice which has been given to Person A by the Chief Judge in Equity in 20XX in an earlier proceeding commenced by Person A on an ex parte basis pursuant to section 63 of the Trustee Act 1925. The Supreme Court proceeding was concluded by Consent Orders. Operative clause 1 in the Deed constitutes a mere acknowledgment or confirmation of the trustee's obligation to transfer the title of the property to the beneficiary at the request of the beneficiary. The conclusion reached is that a resulting trust in terms of the case law is evident.

Relevant legislative provisions: Section 106-50 Income Tax Assessment Act 1997