Private ruling: CGT - legal and beneficial ownership
Date of advice: 22 August 2024
Published: 30 September 2024
Ruling period: 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will a capital gains tax (CGT) event occur in relation to your legal interest in the property when it is sold? | A1: No. Although you have retained a legal ownership interest in the property, you never had any beneficial interest in the property. As you have no beneficial interest in the property, no CGT event will occur in relation to the sale of the property. Therefore, no capital gain or loss will be assessable to you.

Relevant facts and circumstances: In 20XX, person A was interested in purchasing a block of land. They approached a broker to obtain pre-approval for a mortgage to finance the purchase of the land and associated build costs. Person A's spouse (person B) was initially listed on the purchase contract. However the broker said that it would be almost impossible for lenders to allow person B to borrow due to a default of credit against their name. As a consequence, the broker, upon the request of the bank, requested that you be included as a registered proprietor, as well as joint borrower under the mortgage. To secure finance for the purchase of the land and build costs, you agreed to this arrangement with person A with you holding a X% ownership interest and person A with the remaining X% ownership interest. You and person A agreed that although your name would be on the title, they would pay for the purchase of the land and build and you would have no interest in the property. There is no written agreement between you and person A to support this arrangement. However, you have supplied copies of supporting documents: • the land contracts • the land title transfer documents • bank statements • receipts from the builder • person A's bills for home insurance and land rates • person A's bank account details of each home loan and the related bank accounts • conveyancer and real estate documents. In XXXX 20XX, the land was purchased for $X. Person A paid the X% deposit. All mortgage repayments have been made by person A. The dwelling was completed on the land by 20XX and person A moved in immediately. It has been their main residence since and has not been used to produce income. Person A has paid all expenses of the property including land rates, bills, shed and property upgrades. You have not lived at the property and have not contributed to any associated costs of the property. You live in a separate property you own. The most recent loan increase has included person B as borrower and you as now the guarantor. Person A wishes to sell the property in the next few months.

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