Private ruling: CGT- Disposal of asset
Date of advice: 24 March 2017
Published: August 2017
Ruling period: Year ended 30 June 20YY | Year ended 30 June 20ZZ
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will there be a Capital Gains Tax (CGT) event when you transfer the title of the property out of your name? | A1: No.

Relevant facts and circumstances: You purchased a property in 19WW with your spouse and child as tenants in common with equal shares in order to assist your child to enter the property market. The property was purchased with the intention that your child would always be absolutely entitled to the property and would hold the beneficial ownership. The property would be their main residence and ultimately become solely theirs in the future. You and your spouse do not gain any benefit from owning the property and it has always been viewed as your child's property. Your child has lived in the property since the purchase date and would be eligible for the main residence exemption. You and your spouse are not eligible for the main residence exemption on this property as you also own another property that you view as your main residence. The property has never received rental income. Your child has assumed full responsibility for ownership, including refinancing the mortgage into their own name. You and your spouse will transfer your shares of ownership in the property to your child.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 106-50 | Income Tax Assessment Act 1997 Section 104-10

Reasons for decision: Summary: The capital gains tax (CGT) provisions apply where an asset acquired on or after 20 September 1985 is disposed of. However, subsection 104-10(2) of the Income Tax Assessment Act 1997 (ITAA 1997) states that a change in the legal ownership of an asset without a change in the beneficial ownership will not constitute a disposal for CGT purposes. A beneficial owner is defined in Taxation Ruling IT 2486 and Taxation Determination TD 92/106. A beneficial owner is the person or entity who is beneficially entitled to the income and proceeds from the asset. A legal owner is the individual who has their name on the legal documents associated with the CGT asset, such as the title of deed for a property. An individual can be a legal owner but not have beneficial ownership in an asset. In your circumstance, your name is on the title deed; therefore you are the legal owner of the property. However it is determined that although you are the legal owner, you are not the beneficial owner. When the title is transferred to your child, the beneficial ownership will not change and no disposal will occur for capital gains tax purposes. Therefore, no CGT event will occur.