Private ruling: A1 Event - CGT on disposal of property - Legal vs Equitable
Published: 8 December 2025
Ruling period: 30 June 20XX
Date scheme commenced: DDMMYY

Ruling: Q1: Did capital gains tax (CGT) event A1 happen to you upon the sale of Property B? | A1: Yes

Relevant facts and circumstances: On DDMMYY you, and Persons A & B purchased a property (Property A) as joint tenants. You contributed a smaller portion towards the purchase price. Persons A & B contributed a larger portion towards the purchase price. You did not obtain a bank loan to purchase this property. You, and Persons A & B were listed as joint owners on the Property A title holding an equal ownership interest. You stated that Persons A & B gave you the same ownership interest in case there was a Will and Estate issue that might arise upon the death of your parents. You, and Persons A & B resided in Property A together as your main residence for a period of time. In early 20XX Property A was subdivided, comprising land with the existing dwelling with vacant land (Property B) accessible via a different road. Persons A & B funded the subdivision of the Property A land, and paid to have a new dwelling constructed on the subdivided vacant land now known as Property B. After subdividing the Property A land, you and Persons A & B remained on the property titles for the newly subdivided lots (Property A and Property B), having equal shares in the ownership as joint tenants. You did not contribute financially to the subdivision of the land or in the construction costs of the new dwelling at Property B. Property B was the main residence of Persons A & B, while you remained residing at the Subdivided Property A property. From 20XX onwards all upkeep and expenses for the subdivided Property A property were paid for by you. All upkeep and expenses for Property B were paid for by your parents. In the 20XX-20XX income year the Subdivided Property A property was sold. You received the total proceeds from the sale of the Subdivided Property A property. Persons A & B did not receive any of the proceeds from the sale. You used the proceeds from the sale to purchase a new property and main residence for your own use and in your names only. Persons A & B were not added to the title of the newly purchased property. In the 20XX-20XX income year the property located at Property B was sold. Persons A & B received the total proceeds from the sale of Property B and used the proceeds to purchase a new property and main residence. You didn't receive any of the proceeds from the sale of this property. You were advised by Persons A & B that for the sale of their property you are required to pay CGT on your share of Property B.

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 | Income Tax Assessment Act 1997 paragraph 112-25(1)(a)

Reasons for decision: Summary: Section 102-20 provides that you make a capital gain or loss as a result of a CGT event, event A1, 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. | Detailed Reasoning - Subdivided properties: When a block of land is subdivided, the original land parcel is split into two or more separate assets under paragraph 112-25(1)(a) of the ITAA 1997. Subdivision itself is not considered to be a CGT event as subdividing does not change ownership of the subdivided lot with the acquisition date of each subdivided lot being the same acquisition date as that of the original land. Therefore, a capital gain or capital loss is not made at the time of the subdivision. However, the original cost base needs to be apportioned between the new assets, being the subdivided lots, on a reasonable basis. Taxation Determination TD 97/3 Income tax: capital gains: if a parcel of land acquired after 19 September 1985 is subdivided into lots ('blocks'), do Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 treat a disposal of a block of the subdivided land as the disposal of part of an asset (the original land parcel) or the disposal of an asset in its own right (the subdivided block)? provides that the Commissioner will accept any reasonable method of apportioning the cost base between the new lots on an area basis if all the land is of a similar size and market value or on a relative market value basis if this is not the case. | 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. Although TR 93/32 broadly deals with the division of rental income or loss between co-owners, it outlines the Commissioner's approach to considering whether legal and equitable ownership align. TR 93/32 states that capital gains or losses are divided on the same basis as net income or loss where there is a difference between legal and equitable ownership. As such, the Commissioner requires the same standard of evidence to establish that the beneficial ownership is different to the legal title in any relevant property dealings or transactions. This evidence ordinarily includes: • contemporaneous documentation that clearly shows the parties' intentions at the time the property was purchased, and • documentation that clearly shows that the parties treated the property in accordance with those intentions during the ownership period. | 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. Jacobs' Law of Trusts in Australia provides the certainty of intention to create a trust. A court cannot hold that an express trust exists unless it is satisfied that there was the intention to create such a trust. The question will be whether there is language or conduct which shows a sufficiently clear intention to create such a trust. No formal or technical words are required; any apt expression of intention will do. The conclusion that the intention existed may be drawn as an inference from the available evidence. If the inference to be drawn is that the parties intended to create or protect an interest in a third party, and the trust relationship is the appropriate means of creating or protecting that interest or of giving effect to the intention, then an intention to create a trust may be inferred. It is not necessary that the creator of the trust should know that the particular relationship intended to be created is in law a trust. A trust will be created, whether or not the creator is aware of it, provided that in substance the creator's actions have the legal effect of creating the relationship which is known in law as a trust. If the language manifests an intention to create that legal effect, then a trust will be created whether the words 'trust' or 'trustee' are used, or not. | 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 - Application to your circumstances: You, and Persons A & B all held an equal holding in Property A with Persons A & B contributing XX and you contributing XX of the purchase price. Rather than hold the interest in the property according to each party's contribution to the purchase price, the decision was deliberately made to hold the property in equal shares as joint tenants. By holding the property as joint tenants, the right of survivorship would apply to all parties and upon the death of any of the joint tenants. The remaining tenants would hold equal shares in the property, and the deceased person's interest would not form part of their estate. At the time of purchase the decision to own equal shares in the entire property was to protect the asset in case there was a Will and Estate challenge in the event of death of Persons A & B. No evidence was provided to indicate that the intention at the time of purchase was that each couple owned an identifiable portion of the land that would later form a specific subdivided lot. Property A was subdivided to create Property B. Persons A & B paid the subdivision costs and for the construction of a dwelling on the newly subdivided land, that would become their main residence. The title of the newly created Property B remained as joint owners. The subdivision is not a CGT event as subdividing does not change the ownership, that is you, and Persons A & B still held an equal ownership interest in the two newly created properties, as joint tenants. The ownership of Property B was never changed to reflect Persons A & B as the owners but remained in equal shares until it was sold. A resulting trust did not arise due to the intention of the parties, at the time of purchase, to hold the property in equal shares as joint tenants. The ownership interest in Property B was not held in accordance with the contribution to the acquisition, but deliberately owned in equal shares. Persons A & B paid for the subdivision and dwelling on Property B and the intention was to still retain the ownership interest in equal shares. We note that if there had been an absence of intention and a resulting trust had arisen the presumption of advancement would have applied as Persons A & B made a great contribution to the purchase price. In that case we note there is also not documented evidence that would have rebutted the presumption of advancement. The evidence provided supports an express trust over both the Subdivided Property A and Property B properties. The intention was to purchase the Property A property in equal shares, regardless of the difference in the contribution of XX to XX of the purchase price. You have continued to hold an ownership interest in the Property B property, even though you did not contribute to the subdivision costs or the construction of the dwelling. The deliberate intention was to hold both Property A and Property B in equal shares, in the event that a challenge was made to the Will and Estate of Persons A & B. While you did not receive any of the proceeds of the sale of Property B, we consider that how the sale proceeds were disbursed are a private agreement and does not change the legal entitlement. As you have not provided the Commissioner with sufficient evidence that you did not have an equitable/beneficial ownership in the Property B property when it was acquired, CGT event A1 will occur for you when the property was sold under section 104-10 of the ITAA 1997, with both legal and equitable interests having been held by you, at all times. Any capital gain or loss made on the sale of the Property B 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, there is a CGT discount of 50%, which means that you pay tax on half of the net capital gain on that asset.

Does Part IVA apply to this private ruling?: Part IVA of the Income Tax Assessment Act 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement. | If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise allowable) or you or another taxpayer could be liable to the diverted profits tax. | We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. | If you want us to rule on whether Part IVA applies, we will need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply. | For more information on Part IVA, go to our website ato.gov.au/gaar .