Private ruling: CGT, legal v equitable ownership
Date of advice: 17 December 2025
Published: 9 February 2026

Ruling: Q1: Will capital gains tax (CGT) event A1 happen for you when you dispose of your legal interest in Property A? | A1: Yes.

Relevant facts and circumstances: On DD MM YYYY, you and your spouse sold your previous place of residence. Shortly afterwards you purchased a residential property which you reside in as your main residence. It was your intention to use the proceeds from the sale of your first property to provide a residence for each of your children. On DD MM YYYY you and your spouse used proceeds from the sale of your former residence to purchase a residential property (Property 1) for one of your children (Child A) to live in. Child A was married at the time you purchased Property 1. You subsequently sold Property 1 some years later following Child A's divorce. As Child A was not the owner of Property 1 it was not included in Child A's assets during the divorce proceedings and Child A's former spouse did not receive any proceeds from its sale. After selling Property 1 you used the proceeds from its sale to purchase a new residence (Property 2) for Child A to live in. You have advised that when you purchased Property 2 you chose to retain legal ownership as title holder of the property to protect it as Child A's ex-partner was threatening more legal action. You have provided a number of documents including extensive correspondence between Child A and commercial operators involved in the purchase of Property 2. In all correspondence Child A states that they were operating on your behalf to purchase the property for you. You have also provided a Will which describes Property 2 as your property, stating that your wish is for the property to be bequeathed to Child A, or any of Child A's children in the case of Child A predeceasing you. You have advised that the ownership of the Property 2 was agreed upon through an informal verbal discussion between you and Child A and that you did not consider it to be necessary to execute a formal written agreement. You did not seek formal legal advice concerning the equitable ownership of the Property 2, except for correspondence with a legal firm regarding clauses in your Will.

Relevant legislative provisions: Income Tax Assessment Act 1997 - section 102-20 | Income Tax Assessment Act 1997 - section 104-10 | Income Tax Assessment Act 1997 - section 106-50 | Income Tax Assessment Act 1997 - Division 115 | Income Tax Assessment Act 1997 - subsection 116-20(1) | Income Tax Assessment Act 1997 - section 116-30

Reasons for decision: Summary: Capital Gains Tax Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) states that a capital gain or capital loss is made only if a CGT event happens to a CGT asset. The most common CGT event, event A1, occurs under section 104-10 of the ITAA 1997 when there is a change in ownership of a CGT asset. Real property is a CGT asset under section 108-5 of the ITAA 1997. Under subsection 104-10(1) of the ITAA 1997 CGT event A1 happens if you dispose of a CGT asset, however, subsection 104-10(1) provides that a disposal of a CGT asset does not occur if there is only a change of legal ownership and no change of equitable ownership. Section 108-7 of the ITAA 1997 treats individuals who own a CGT asset as joint tenants as if they each owned a separate CGT asset constituted by an equal interest in the asset and as if each of them held that interest as a tenant in common. It is recognised that an individual can be a legal owner of a property but have no equitable ownership. In these circumstances, it is the individual who has equitable ownership of a property who is subject to a CGT event upon sale. Under subsection 116-20(1) of the ITAA 1997, your capital proceeds from a CGT event includes the total of the money you have received, or are entitled to receive, in respect of a CGT event happening. Where on the disposal of an asset no money or property is received, the market value substitution rule contained in section 116-30 of the ITAA 1997 generally applies, such that you are taken to have received the market value of your ownership interest in the property at the time the CGT event occurs. If you sell, transfer or gift property to family or friends for less than it is worth, you'll be treated as if you received the market value of the property for CGT purposes. You use the market value of a property to calculate your CGT if both of the following are true: • what you received was more or less than the market value of the property • you and the new owner were not dealing with each other at arm's length. This is called the 'market value substitution' rule. Under Division 115 of the ITAA 1997, an entity may be eligible for a discount on CGT assets where they meet the relevant criteria, including holding the asset for longer than 12 months. Legal and equitable ownership A person's legal interest in a property is determined by the legal title to that property under the property law legislation in the State or Territory in which the property is situated. In some cases, it is possible for legal ownership to differ from equitable, also known as 'beneficial' ownership. An individual may hold a legal ownership interest in a dwelling for another individual in trust. The Commissioner's position, as stated in paragraphs 41 and 42 of Taxation Ruling TR 93/32 Income tax: rental property - division of net income or loss between co-owners, is that there are extremely limited [emphasis added] circumstances where the legal and equitable interests are not the same, and that there is sufficient evidence to establish that the equitable interest is different from the legal title, resulting in a trust arrangement whereby the legal title holder is taken to be holding the legal ownership interest of the property on trust for the true owner in equity. Although TR 93/32 broadly deals with the division of rental income or loss between co-owners, it outlines the Commissioner's approach to considering whether legal and equitable ownership align. TR 93/32 states that capital gains or losses are divided on the same basis as net income or loss where there is a difference between legal and equitable ownership. As such, the Commissioner requires the same standard of evidence to establish that the beneficial ownership is different to the legal title in any relevant property dealings or transactions. This evidence ordinarily includes: • contemporaneous documentation that clearly shows the parties' intentions at the time the property was purchased, and • documentation that clearly shows that the parties treated the property in accordance with those intentions during the ownership period. Gibbs CJ stated in Muschinski v. Dodds [1985] HCA 78 that the relevant principles included there being contemporaneous evidence: Where both transferees have contributed to the purchase money, the intentions of both are material, but where only one has provided the money it is his or her intention alone that has to be ascertained. The evidence admissible to establish the intention of the real purchaser will comprise 'the acts and declarations of the parties before or at the time of the purchase... or so immediately thereafter as to constitute a part of the transaction' ( Charles Marshall Pty Ltd v Grimsley [1956] HCA 28; (1956) 95 CLR 353 at 365) In relation to evidence of a trust arrangement, the following should also be noted: • contemporaneous evidence includes any documents such as emails, diary entries, bank documents, correspondence with third parties involved in the transaction, etc., that were created at the time of the property's purchase, • where there is little or no contemporaneous evidence of intention and the terms of an arrangement, formal documents prepared many years after a property was purchased will be of little probative value, and • the evidence must be unambiguous. In the absence of clear and compelling evidence to the contrary, the property is considered to be owned by the people registered on the title. Trust Arrangements It is accepted that it is difficult to satisfactorily define a trust in a comprehensive manner. Perhaps the most widely referred to definition is that of Underhill ( Law of Trusts and Trustees , 12th ed, p 3): A trust is an equitable obligation, binding a person (who is called a trustee) to deal with property over which he has control (which is called trust property), for the benefit of persons (who are called the beneficiaries or cestuis que trust) of whom he may himself be one, and any of whom may enforce the obligation. | Detailed Reasoning - Types of trusts: Express Trust An express trust is one intentionally created by the owner of property to confer a benefit upon another. It is created by express declaration, which can be affected by some agreement or common intention held by the parties to the trust. For an express trust to be created it is necessary that there is certainty of the intention to create a trust, subject matter and the object of the trust. While trusts can be created orally, all State Property Law Acts contain provisions that preclude the creation or transfer of interests in land except if evidenced in writing. Resulting or implied trusts On the purchase of real property, a resulting trust may arise where the legal title that vests in one or more of the parties does not reflect the respective contributions of the parties to the purchase price. A resulting trust arises by operation of law and falls into two broad categories. One such category is where someone purchases property in the name of another ( Calverley v Green 56 ALR 483) ( Calverley v Green ). A trust is presumed in favour of the party providing the purchase money. If an individual purchases and then pays for a property, but legal title is transferred to another person at their direction, the presumption of a resulting trust arises - the property is held in trust for them. The law presumes that the purchaser, as the person providing consideration for the purchase intended to retain the beneficial interest, although the legal interest is in the other's name. The presumption of resulting trust can, however, be rebutted by the presumption of advancement. Presumption of advancement The presumption of advancement is an equitable principle which may arise when the purchaser of a property confers a legal ownership interest in property upon another person with whom they have a close familial relationship. The presumption only applies to transfers and purchases made by people who stand in particular relationships, including parents from parents to their children. Under the presumption of advancement, it is presumed that the property is transferred with the intention of transferring both the beneficial interest in the property as well as the legal title. Where the presumption of advancement applies, the parties hold their equitable interests in the property in the same proportions as their legal interests. Furthermore, in the absence of evidence to the contrary, the presumption of advancement effectively rebuts the presumption of resulting trust, in which case the onus upon the advancer to provide evidence that a trust was in fact created in relation to their contribution to the purchase of the property. Constructive Trusts A constructive trust is a trust imposed by operation of law, regardless of the intentions of the parties concerned. It applies whenever equity considers it unconscionable for the party holding title to the property in question to deny the interest claimed by another. The existence of a constructive trust is dependent upon the order of the court. Principal and agent relationship The legal meaning of agency At its narrowest, the legal concept of agency involves the capacity of one person (the agent) to act on behalf of another person (the principal) with the effect of creating a legal relationship between the principal and a third party ( International Harvester Company of Australia Pty Ltd v Carrigan's Hazeldene Pastoral Lease Co (1958) 100 CLR 644 at 652). A principal is then bound by any action of their agent that is within the agent's authority. Other broad formulations of the concept of agency include the notion that an agent is a party that can "create or affect" the legal rights and obligations of another party ( Petersen v Moloney (1951) 84 CLR 91 at 94) and even simply circumstances where one party acts on behalf of another party Erickson v Carr (1945) 46 SR (NSW) 9 at 12). The Commissioner's view is that the concept of agency in the A New Tax System ( Goods and Services Tax) Act 1999 (GST Act) involves the narrow concept of one party having authority to create legal relations on behalf of another ( GST Ruling GSTR 2000/37, paragraphs 45-47). With a few minor exceptions, any act that can be performed by a person can be performed by an agent ( Christie v Permewan, Wright & Co Ltd (1904) 1 CLR 693 at 700) and all persons who are of sound mind can act as agents. | Detailed Reasoning - Application to your circumstances: The Commissioner's starting point is that legal and equitable interests are equivalent unless there is sufficient evidence to demonstrate that the equitable interest varies from legal interest. You advised that when you and your spouse purchased the Property 1, Child A requested that both you and your spouse were registered as the property owners. When you sold Property 1 and purchased Property 2, Child A again requested that you retain legal ownership of Property 2 to protect the asset from Child A's former spouse pursuing a legal claim against the property. You did not execute any form of written agreement regarding the ownership structure of either Property 1 or Property 2 to evidence the establishment of a trust arrangement with Child A, nor have you provided any other evidence to show that there was an intention for you to confer the equitable ownership of either property upon Child A. Furthermore, you contributed the total amount of the purchase price for both properties. As you paid the total purchase price of Property 2 from funds originating from the sale of your own former residence and correspondingly acquired full legal ownership of Property 2 at that time, neither the presumption of a resulting trust nor the presumption of advancement will apply. The decision to retain ownership of Property 2 yourself to protect it from the threat of legal action by Child A's former spouse illustrates an exercise of your equitable ownership interest and is contrary to the notion that you established a trust conferring equitable ownership of the property upon Child A. We note that you have not derived any income from Property 2 during your ownership period. Although we accept that you have not directly financially benefited from your ownership of the property, you have instead exercised your ownership rights by providing Child A with use and enjoyment of the property while protecting the ownership of an asset which was purchased with proceeds which originate from the sale of your own property. Further evidence that you retained control over Property 2 is demonstrated in the correspondence you have provided which describes you as the property's owner, with Child A operating with agency under your direction as the principal. Also relevant is a clause in your Will describes Property 2 as your own property which forms part of your estate as opposed to Child A's property which you hold on trust for them. As you have not provided evidence to demonstrate that the equitable ownership of Property 2 is different to its legal ownership, the Commissioner's position, as outlined in TR 93/32, remains that you acquired both the legal and equitable ownership of Property 2 when you purchased it for Child A to live in. Therefore, CGT event A1 will occur for you when you dispose of the property by transferring it to Child A or selling it to a third party. If you transfer the property to Child A for less than the market value of the property, section 116-30 of the ITAA 1997 will apply such that you will be deemed to have received the market value of the property at the date that you dispose of it. As you have owned the Property for longer than 12 months you can apply the 50% CGT discount under section Division 115 of the ITAA 1997 to reduce any capital gain you incur when you dispose of the property.