Private ruling: Capital gains tax
Published: March 2015
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Did you make a capital gain (or loss) when the property was sold? | A1: No.

Relevant facts and circumstances: You purchased a property for your child. The property was used exclusively as their main residence and no other person has ever lived in the property. Your child is legally disabled and receives full disability benefits. Due to their disability and to ensure no one could deceive your child and take away their property you obtained the assistance of your other child who consented to also have their name on the title deed. You supplied all of the funds to purchase the property for your child. You have continued to pay for all ongoing expenses to maintain and keep the property. Your child's disability does not enable them to be employed. Originally there were family members that lived in the area; however that is no longer the situation. You have sold the property and purchased a new residence within a Special Disability Trust for your child to live in. The new property is situated close to family members who support your child. You used all the proceeds from the sale of the premises to purchase the new residence. At no time did you receive the proceeds from the sale of the premises. These funds were held in the solicitors trust account.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 120-20

Reasons for decision: Summary: Under section 120-20 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 you dispose of a CGT asset. You are considered to have disposed of a CGT asset if a change of ownership occurs from you to another entity because of some act or event or by operation of law. The capital gain or capital loss is made at the time of the event (section 104-10 of the ITAA 1997). | Detailed Reasoning - Beneficial ownership: 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 would be the title deed for a property. An individual can be a legal owner but have no beneficial ownership in an asset. It is the beneficial owner of a CGT asset that is liable for capital gains tax upon sale of the assets. In some cases, an entity may hold a legal ownership interest in property for another individual in trust. In this case, we accept that you were not the beneficial owner of the property. Your child has lived in the property and used it as their main residence. Your child is the beneficial owner of the property. Therefore, when the property was sold you did not make a capital gain (or loss).