Private ruling: CGT - Legal v beneficial ownership
Date of advice: 10 November 2023
Published: 8 January 2024
Ruling period: Year ended XX/MM/CCYY
Date scheme commenced: XX/MM/CCYY

Ruling: Q1: Did CGT Event A1 occur when Person A transferred their share of the property at XX to Person B? | A1: No. CGT Event A1 under section 104-10 of the Income Tax Assessment Act 1997 occurs when there is a change of ownership of a CGT asset. However, CGT Event A1 does not occur if there is only a change of legal ownership and not a change of beneficial ownership. The Commissioner accepts that in the circumstances, although Person A was a legal owner of the property along with Person B, it was never intended for Person A to have any beneficial ownership of the property. It can then be reasonably concluded that at the time of the change of legal ownership when Person A transferred their interest in the property to Person B, that no change in the beneficial ownership of the underlying property occurred. Therefore, CGT Event A1 did not occur when Person A transferred their interest in the property to Person B.

Relevant facts and circumstances: Person A and Person B are siblings. On XX/MM/CCYY Person B paid $XXX cash deposit under the Contract of Sale for the purchase of land and $XXX cash deposit for the building of the house on the land. The property is known as a place in a State being the land described as Lot XXX on Plan of Subdivision XXXXXXX and being all the land contained in Certificate of Title Volume XXXXXX Folio XXX. In order to purchase the property, Person B was unable to obtain finance from the Lender without a secondary signatory as a party to the loan Agreement. On or about XX/MM/CCYY, Person A and Person B entered into a loan agreement with a Company to finance the purchase of the land and the house build at the property. Person A entered into the Loan Agreement as a co-mortgagor and was registered on the title solely to assist their sibling satisfy the funding requirements and secure the loan to purchase the property. Person B made all the loan repayments, paid all the purchase monies for the Property and has been responsible and paid all utility, maintenance and other expenses in respect of the property. Person A lived in the Property when it was acquired in CCYY until they got married in CCYY. Whilst living at the Property they did not pay rent or contribute monies towards the repayment of the loan, utilities, maintenance or improvements to the Property. Person A always regarded the Property as being owned entirely by Person B and only held their share for their sibling's benefit. The property was always Peron B's main residence. The Property was never used to derive assessable income. Peron A transferred their equal undivided share in the Property to Person B on XX/MM/CCYY on the basis that they had always held their interest for the benefit of Person B.

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