Private ruling: Legal versus beneficial ownership
Date of advice: 21 June 2022
Published: August 2022
Ruling period: Year Ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are the taxpayers the joint beneficial owners of the Property? | A1: Yes. The Commissioner accepts based on the facts, that the taxpayers were at all times from the purchase in 1997 the only beneficial owners of the Property. | Q2: If a capital gain or capital loss arises from the sale of the Property for the taxpayers will the gain or loss be disregarded under subdivision 118-B of the ITAA 1997. | A2: Yes. As the Property was at all time the taxpayers main residence, any capital gain or loss will be disregarded.

Relevant facts and circumstances: The property was purchased post 1985. The legal owners, recorded on the title of the property at time of purchase, were: • Person A and Person B (married, as joint tenants) • You and Person C (married, as joint tenants) as tenants in common in the shares of 98% and 2% respectively. You and Person C are husband and wife. You and Person C are the parents of Person A. Person A and Person B were married at the time of the purchase of the property and later divorced. At time of purchase of the property, a mortgage was entered into with the Bank. Person A, Person B, you and Person C secured finance from the bank to fund part of the purchase price. As a result of the divorce of Person A and Person B and pursuant to an agreement under the Family Law Act, the mortgage was discharged and removed from the title of the property. Transfer was registered as follows: • Person B transferred 49/100 share of the property as legal owner to Person A • You transferred 1/100 share of the property as legal owner to Person A. The transfer of your 1/100 share was due to you not wanting to be on the title of the property due to a failed business venture and concerns over creditors making claims on the property. You, Person C and Person A were advised by your lawyers not to have you as a registered legal owner of the property. Following the transfer, the legal owners of the property recorded on the title was Person A and Person C, as tenants in common in the shares of 99% and 1% respectively. From the time of the purchase of the property, it was always intended that you and Person C were the only joint beneficial owners of the property. At the time of purchasing the property, you highlighted the following: • You had recently left a failed business and the Bank required additional borrowers to secure the loan required to purchase the Property. • Person A and Person B agreed to be additional borrowers at the time of the purchase on the basis that you and Person C would be responsible for all financial obligations in respect of the property • The involvement of Person A and Person B was to help secure the loan from the Bank to receive finance. This led to their names being on the title and on mortgage documents. • Person A and Person B had no obligation to make any contributions to the property You and Person C have always lived and resided in the property as your main residence. You and Person C have never rented or leased any part of the property to any person. Person A and Person B have never lived or resided in the property. Person A states he has never lived at the property. Person A and Person B have never made any financial contribution or payment in respect of the property. Person A and Person B have never taken any step since the property was acquired to assert or make in any way a claim that they have/had any beneficial interest in the property. All payments of the mortgage repayments, incidental costs and expenses, rates, insurance, repairs, maintenance, renovations and outgoings of the property have been paid by you and Person C.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20 | Section 104-10(1) | Subdivision 118-B