Private ruling: CGT - disposal of land - beneficial ownership
Date of advice: 20 September 2022
Published: December 2022
Ruling period: The year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Did a capital gains tax (CGT) event happen to Person A on the sale of the property in relation to a XX% interest in the property, rather than a YY% interest? | A1: Yes. CGT event A1 occurs when there is a disposal of an ownership interest in a CGT asset. However, CGT event A1 does not occur if there is only a change of legal ownership for you and not a change of beneficial ownership. Based on the facts, the Commissioner accepts that in Person A's circumstances, although they were named on the title of the property as YY% legal owner, it was intended for Person A to have a XX% beneficial ownership interest in the property and it can be reasonably concluded that at the time the property was sold, Person A disposed of this XX% beneficial ownership interest. Therefore, CGT event A1 happened to Person A's XX% beneficial ownership interest when the property was sold. | Q2: Did a capital gains tax (CGT) event happen to Person B on the sale of the property in relation to a XX% interest in the property rather than a YY% interest? | A2: Yes. CGT event A1 occurs when there is a disposal of an ownership interest in a CGT asset. However, CGT event A1 does not occur if there is only a change of legal ownership for you and not a change of beneficial ownership. Based on the facts, the Commissioner accepts that in Person B's circumstances, although they were named on the title of the property as YY% legal owner, it was intended for Person B to have a XX% beneficial ownership interest in the property and it can be reasonably concluded that at the time the property was sold, Person B disposed of this XX% beneficial ownership interest. Therefore, CGT event A1 happened to Person B's XX% beneficial ownership interest when the property was sold. | Q3: Did a CGT event happen to Person C on the sale of the property in relation to a XX% interest in the property, rather than a YY% interest? | A3: Yes. CGT event A1 occurs when there is a disposal of an ownership interest in a CGT asset. However, CGT event A1 does not occur if there is only a change of legal ownership for you and not a change of beneficial ownership. Based on the facts, the Commissioner accepts that in Person C's circumstances, although they were named on the title of the property as YY% legal owner, it was intended for Person C to have a XX% beneficial ownership interest in the property and it can be reasonably concluded that at the time the property was sold, Person C disposed of this XX% beneficial ownership interest. Therefore, CGT event A1 happened to Person C's XX% beneficial ownership interest when the property was sold.

Relevant facts and circumstances: The property was purchased by Person A, Person B and Person C (you) some time ago. On the property's title documents, Person A holds XX% legal title of the property. Person B and Person C hold the remaining XX% interest in the property jointly. You contend that Person A's actual ownership of the property is XX%, with Person B and Person C jointly holding the remaining XX% interest in the property (the beneficial interests). You contend that ownership on the legal title differs from the beneficial interests, for the purpose of enabling Person A to secure a mortgage on their share of the property. Person B and Person C guaranteed Person A's mortgage on their share of the property. The purchase of the property and all expenses relating to it have always apportioned based upon the beneficial interests. You contend that there was a written agreement detailing the arrangement regarding the property, however you have been unable to locate a copy. You suggested that the written agreement may have been destroyed when you moved, or otherwise when you were affected by natural disasters. You contend that there were numerous emails referring to the beneficial interests agreed, however you have been unable to restore copies of these emails from the data saved on hard disks. You provided internet banking receipts, rates notices and an explanation of how rates for the property have been paid in accordance with the beneficial interests during your ownership periods. A contract to dispose of the property was entered into in the 20XX income year, with settlement occurring shortly after.

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