Private ruling: Capital gains tax
Date of advice: 9 December 2016
Published: May 2017
Ruling period: Year ending 30 June 201X
Date scheme commenced: 1 July 201X

Ruling: Q1: Will you be assessable on capital gains for the sale of the property? | A1: No.

Relevant facts and circumstances: In 200X you purchased the property on behalf of your parent. You obtained the mortgage to facilitate the purchase, as your parent was unable to finance the purchase. Your parent provided the deposit for the property for the initial purchase and maintained the mortgage repayments. The property was used by your parent as the principle residence from the date of purchase. In 201X your parent was in hospital and ceased making the mortgage repayments. You commenced paying the mortgage repayments. You decided to list the property for sale. In 201X your parent commenced legal proceedings in the Supreme Court in relation to the ownership of the property. In 201X a deed of release and indemnity was determined in the Supreme Court which determined that you acknowledge and agree that as registered owner of the Property, you have at all material times held the property on trust for your parent absolutely. The deed of release and indemnity determines that the sale proceeds are to discharge the mortgage, finalise amounts owing for legal and conveyancing expenses, and payment to you for mortgage repayments you have incurred. The remaining profits are to be paid to your parent.

Relevant legislative provisions: Income Tax Assessment Act 1997 - Section 102-20 | Income Tax Assessment Act 1997 - Section 106-50

Reasons for decision: Summary: Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a capital gain or capital loss results from a capital gains tax (CGT) event occurring. The most common CGT event, event A1, occurs when you dispose of a CGT asset to someone else. CGT event A1 will occur when the property is sold. When applying the CGT provisions, the most important element is ownership. There are different types of ownership of CGT assets. A beneficial owner is the person or entity that 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 the beneficial owner of a CGT asset that is assessable on capital gains upon the sale of the asset. In some cases an entity may hold legal ownership of a property on trust for another individual. Where a property it held on trust for another who has absolute entitlement to the property, any act done by the trustee is treated as if the act had been done by the beneficiary. Section 106-50 of the ITAA 1997 provides an example regarding absolutely entitled beneficiaries: An individual becomes absolutely entitled to a CGT asset of a trust. The trustee later sells the asset. Any capital gain or loss from the sale is made by the individual, not the trustee. Application to your circumstances In your case it was determined by the Supreme Court that you held the property on trust for your parent absolutely and that all profits from the sale are to be paid to your parent. You have held legal ownership in the property, but do not have beneficial ownership. As your parent is absolutely entitled to the property, the sale is treated as an act done by you parent and not done by you. You are not assessable for CGT on the sale of the property.