Private ruling: CGT - legal vs beneficial ownership
Date of advice: 28 June 2023
Published: 21 August 2023
Ruling period: Year ending 30 June 2023
Date scheme commenced: 1 July 2022

Ruling: Q1: Did you have a capital gains tax (CGT) event when your XX% interest of the property was sold? | A1: No.

Relevant facts and circumstances: Your family member A purchased a property in 20XX. The size of the property exceeds 2 hectares. Due to family member A's financial circumstances, the bank would not approve the loan unless another person was added on the title and the mortgage. It was agreed that your name would be placed on the title and the mortgage. There are no documents to record the agreement. Family member A provided the deposit to purchase the property and made all the mortgage repayments. Since the property was purchased, family member A paid all the expenses relating to the property including renovation costs, repairs and maintenance and utilities. The property was family member A's main residence. You have never lived at that property. You have never contributed financially or made decisions about the property. The property has been sold. ATO issued a private ruling to family member A. In that ruling, family member A was considered the sole beneficial owner of the property for CGT purposes based on the facts.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20 | Income Tax Assessment Act 1997 Section 104-10

Reasons for decision: Summary: When considering the disposal of your interest in the property, the most important element in the application of the CGT provisions is ownership. It must be determined who is the legal and/or beneficial owner of the property. A person's legal interest in a property is determined by the legal title to that property under the land law legislation in the State or Territory in which the property is situated. The legal owner of the property is recorded on the title deeds for the property issued under that legislation. However, it is possible for legal ownership to differ from the beneficial ownership. Based on the facts, the Commissioner accepts that in your circumstances, although you and family member A were the legal owners of the property, it was never intended that you would have any beneficial ownership. The sale of the property has triggered a CGT A1 event. It can be reasonably concluded that you did not have beneficial ownership of the property. Consequently, the CGT event A1 did not happen to you when your XX% interest of the property was sold.