Private ruling: Income tax – capital gains tax – beneficial ownership
Date of advice: 4 December 2018
Published: March 2019
Ruling period: Year ending 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Will I be liable to pay capital gains tax (CGT) when I transfer my ownership interest in the property to my parent? | A1: No. We consider that although you hold the legal title to the property, you are not the beneficial owner. When you transfer the property to your parent there will be no change in the beneficial ownership of the asset. Therefore, a CGT event will not occur and consequently you will not be liable to pay any CGT on the transfer of the property. Further information about beneficial owners in contained in Taxation Ruling IT2486 and Tax Determination TD 92/106.

Relevant facts and circumstances: Your parents purchased land (the property) after 20 September 1985. At that time of the purchase, the bank would not give your parents a mortgage because of their age, unless you were included as a mortgagee. As a result you were required to be listed on the title as a joint tenant of the property. It was never you or your parent’s intention that you would profit or benefit from the property in any manner and you had no beneficial ownership in the property. Soon after, your parents built a house on the property and it has been their main residence ever since. Your parents discharged the mortgage in full after a few years using their own assets. The title to the property was later changed from joint tenants to tenants in common with each having 1/3 share on the title to allow your parents to leave their shares in the property to each other in their wills. Recently one of your parents passed away and left his/her 1/3 ownership in the property to his/her spouse. You still retain 1/3 legal ownership of the property. Your remaining parent is concerned about his/her ability to pay future bills and would like to have the property transferred entirely to his/her name. You did not pay any of the expenses that relate to the property. You did not contribute any funds to purchase the property. The property has never been rented. You intend to transfer your 1/3 share of the property in the next 6 months. You will not receive any funds from the transfer of the property.

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