Private ruling: Capital gains tax – main residence exemption
Date of advice: 13 December 2017
Published: May 2018
Ruling period: Year ending 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Will the sale of the property result in a capital gains tax (CGT) event for you? | A1: Yes Under section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997), an entity will make a capital gain or a capital loss if a capital gains tax (CGT) event happens to a CGT asset. CGT event A1 occurs when a CGT asset is disposed of. It is possible for the legal ownership to differ from beneficial ownership. It is the beneficial owner that will have a CGT event upon sale of a CGT asset. In some cases, an entity may hold a legal ownership interest in property for another individual in trust. In your case, your relative held no beneficial interest in property A and the capacity on which they were named on the title was as trustee for you, who was the sole beneficial owner. Therefore you will have a CGT event on disposal of the property. Further information on beneficial ownership can be found in Taxation Ruling IT 2486 and Taxation Determination TD 92/106. | Q2: Are you eligible to apply the main residence exemption when the property is sold? | A2: Yes Under section 118–100 of the Income Tax Assessment Act 1997 (ITAA 1997), the main residence exemption applies to disregard a capital gain or capital loss where an individual owns the dwelling and occupies it as their principal place of residence throughout their ownership period. In your case, as shown in question one above, you were the beneficial owner of the property and a CGT event occurred for you when the property was sold. The property has been your principal place of residence in your ownership period and therefore a capital gain or capital loss you make from the property sale will be disregarded under the main residence exemption.

Relevant facts and circumstances: A property (Property A) was acquired in late 20XX. The property was your main residence since the date of acquisition. You were not able to secure finance with your bank for the purchase of Property A on your own. Your relative agreed to provide a guarantee in respect of any loan by the bank to you. You and your relative were informed by the bank that, even such a guarantee, a mortgage loan to you only, would not be in accordance with the bank’s lending criteria at the time. The bank insisted that, in addition to your relative providing such a guarantee, their lending criteria would only be satisfied if your relative was also registered on the Title along with you. The purchase of Property A was partly funded by the sale of another residence (Property B) which was solely owned by you. Both Property A and Property B settled on the same day. Your relative held no beneficial interest in property A and the capacity on which that they were named on the title was as trustee for you who was the sole beneficial owner. Your relative did not contribute any portion of the purchase price to Property A. All other outgoings related to Property A, for example council rates and water were paid by you. Property A sold at auction with the contract signed in late 20XX and the settlement occurred on late 20XX. Your relative had no interest in, or entitlement to, any of the net sale proceeds at settlement. There are written statutory declarations and declarations of trust which were formed between yourself and your relative to confirm that your relative, as a registered proprietor on the Title, held interest on trust for you.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 118-100