Private ruling: Capital gains tax
Date of advice: 17 November 2016
Published: March 2017
Ruling period: Year ending 30 June 201X | Year ending 30 June 201X
Date scheme commenced: 1 July 201X

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: In 200X, you purchased a property on behalf of your family member. You obtained the mortgage to facilitate the purchase, as your family member was unable to finance the purchase. You did not pay the initial deposit for the property and have not made any repayments on the property mortgage. The property was used by your family member as their principle residence from the date of purchase. Your family member has attended to and paid for all the maintenance and upkeep of the property. All improvements undertaken on the property were done by your family member's choice and cost. At no time was it treated as a rental property. No income was received by you and you did not claim any expenses as deductions.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 104-10(2)

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, an example is the title deed for a property. An individual can be a legal owner but have no beneficial ownership in an asset. It is when the beneficial owner of a CGT asset changes that a CGT event occurs. Application to your circumstances Your name in on the title deed, therefore you are the legal owner of the property. However, you are not entitled to any income or proceeds for the property. You did not pay the initial deposit, nor have you been involved in any of the decisions or costs regarding the property including improvements and maintenance. It is determined that although you are the legal owner, you are not the beneficial owner. When the title is transferred to your family member, the beneficial ownership will not change and no disposal will occur for capital gains tax purposes. Therefore, no CGT event will occur.