Private ruling: Legal versus beneficial ownership
Date of advice: 4 November 2025
Published: 22 December 2025
Ruling period: DD MM 20YY
Date scheme commenced: DD MM YYYY

Ruling: Q1: Does the portion of the property at the property (all units) acquired before 20 September 1985 maintain its pre- asset status, as per section 149-10 of the Income Tax Assessment Act 1997 (ITAA 1997) upon its disposal? | A1: No. | Q2: Can you disregard the Capital Gains Tax (CGT) A1 event that occurred under section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) when you obtained legal ownership of XX% of the property on DD MM 19YY? | A2: N/A. Whilst the CGT event A1 did not occur to you, it represented the time you obtained legal ownership, and it did start your ownership period.

Relevant facts and circumstances: You and Person A were married on DD MM 19YY overseas. The property was bought by the spouse shortly after arriving from overseas in 19YY. Pre-CGT Asset The land was purchased and developed from 19YY by both Person A and Person B as tenants in common in equal shares. The purpose was to provide homes for their families and rental income from a partnership. Unit X was occupied by you and Person A. Unit X was occupied by Person B and Persons C. The partners built X units on the property prior to the introduction of legislation in State A for Strata Plans in the early 19YYs. Ownership X unit (unit X) was held by your family. Your family's primary residence from 19YY until 19YY, rented from DD MM 19YY. Your family moved to another residence in 19YY. X unit was held by Person B and Persons C was used as their primary residence. Records confirm together the X families partnership held X units. The other units were held jointly with profits for each financial year split XX:XX between the X families. Person A passed away on DD MM 19YY and you replaced them on the legal title of the property title as the sole heir to the full estate. Nominal stamp duty was paid on the transfer in State A, recognising from the State Government perspective the right of survivorship. Person B passed away on DD MM 20YY and Persons C replaced Person B on the property title. The property(all X units) were sold to a property developer on DD MM 20YY. The property settled for $XX. The property still had X units prior to the sale. Unit X provided rent for you from DD YY 19YY. Unit X was Persons B's principal residence. A number of income returns have been lodged late just recently and the 20YY ITR return which covers the period of the date of the disposal is still outstanding. Title of the property when disposed of: • You were added to the original title when Person A passed DD MM 19YY; and • Persons C was added to the original title when Person B passed DD MM 20YY. The title search confirms that you and Persons B are tenants in common in equal shares of the Property. Records of the arrangement No correspondence can be located by your family confirming formally how the property was to be treated. Person A's Will Person A's will confirmed that: Provided you of the Property in the said State survives me by the space of X-X(XX) days then I appoint my said spouse to be the sole Executrix and Trustee of this my Will and I give her an absolute interest in the whole of my estate whether real or personal ..."

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 104-5 | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Detailed Reasoning - Change of ownership: CGT event A1 in section 104-10 of the ITAA 1997 is triggered by a change of ownership of a CGT asset. The type of change that is relevant will depend on the type of ownership the holder of the CGT asset has and what the purported acquirer obtains and whether, for example, their ownership is recognised at law or in equity. Most transactions give rise to clear changes in ownership without needing to address considerations that arise because ownership has been divided. It is clear that CGT event A1 in section 104-10 of the ITAA 1997 does not happen if: • there is a mere change in the trustee of a trust (as subsection 960-100(2) of the ITAA 1997 provides that the trustee of a trust is taken to be an entity consisting of the person who is the trustee at any given time) • a person transfers legal ownership but continues to be the beneficial owner (an exception in CGT event A1 itself). Consistent with the decision of the majority of the Full Court, we consider that triggering CGT event A1 in section 104-10 of the ITAA 1997 does not require a change in legal as well as beneficial ownership. Further, we consider that a change in beneficial ownership does not occur unless the purported acquirer of the CGT asset has full dominion over it that a court of equity would enforce. This is akin to the rights to specific performance a purchaser of land obtains upon paying the settlement sum. It is not sufficient for a change in beneficial ownership that the purported acquirer of the CGT asset has some form of proprietary interest, or equitable or beneficial interest in the asset falling short of beneficial ownership, and the purported seller has retained rights to deal with the asset, including powers of disposition over it. | Detailed Reasoning - Family Law Act: You referred to the cultural and historical contexts and suggested this meant that historically properties were bought in the spouse's names only even though it was always intended/understood that the property was owned by both the spouse and wives XX/XX. X owners effectively even though only the spouse's names were on the legal title. You stated that this interest in the property would have been recognised by the courts had there been a settlement under the Family Law Act 1975 (CTH) . | Detailed Reasoning - Effect of Family Court order: CGT event A1 in section 104-10 of the ITAA 1997, rather than CGT event E1 in section 104-55 of the ITAA 1997, happens if an order creates a trust over an asset because the change of ownership happens by operation of law. CGT event E1 does not happen as there is no relevant 'you' as contemplated by that event. | Detailed Reasoning - Application to your circumstances: You have stated the XX% of the complex was purchased in your spouse's name on the understanding you shared in the ownership of the property. While it is acknowledged under the Family Law Act 1975 (CTH) a spouse may have some proprietary interest, or equitable or beneficial interest in an asset held in the other spouse's name, without a court order creating a constructive trust over the interest in the property the ownership remains with the person/persons on the legal title. The Commissioner cannot accept a constructive trust dependent upon a series of hypothetical circumstances, that did not arise, as sufficient evidence of beneficial interest being different to the legal interest. We also note that where an interest in a property must be transferred from one spouse to the other spouse to comply with court orders issued pursuant to the Family Law Act 1975 , a CGT event occurs, and CGT is disregarded under the rollover provision relating to relationship breakdown. | Detailed Reasoning - Capital gains tax: Section 102-20 states that a capital gain or capital loss is made if a CGT event happens to a CGT asset. CGT assets include any kind of property or a legal or equitable right that is not property. Section 104-5 sets out a list of CGT events. Capital gains are triggered when a CGT event in Division 104 happens. Of relevance is CGT event A1 which happens if you dispose of a CGT asset (section 104-10). Where an asset has been acquired on or after 20 September 1985, if a CGT event happens, you may make a net capital gain or loss from the event. Generally, you make a capital gain when the capital proceeds exceed the cost base. You make a capital loss when the reduced cost base exceeds the capital proceeds (subsection 104-10(4)). Broadly, capital proceeds include the money and market value of property you receive (or are entitled to receive) when an event happens (section 116-20). The cost base includes the money and market value of property you provide (or are required to provide) to acquire a CGT asset, and some other costs (section 110-25). Division 102 includes net capital gains from CGT events in your assessable income. Section 102-20 provides that capital gains tax (CGT) is incurred when a CGT event takes place, and you make a gain from the event. There are exceptions to the general rule, and of relevance is paragraph 104-10(5)(a) that states that a capital gain or capital loss is disregarded if you acquired the asset before 20 September 1985. 'Acquire' is defined in section 995-1: (a) a CGT asset: you acquire a CGT asset (in its capacity as a CGT asset) in the circumstances and at the time worked out under Division 109 (including a provision listed in Subdivision 109-B); and... You acquire a CGT asset when you become its owner and the time when you acquire the asset is when you become its owner (subsection 109-5(1)). Subsection 109-5(2) has specific rules for the circumstances in which, and the time at which, you acquire a CGT asset as a result of a CGT event happening. Essentially, a CGT asset acquired before 20 September 1985 remains a pre-CGT asset if the majority underlying interests in the asset have not changed since 20 September 1985 (Division 149). A change of ownership after 20 September 1985 will result in an asset losing its pre-CGT status. | Detailed Reasoning - CGT event A1- disposal of a CGT asset: CGT event A1 is the disposal of a CGT asset pursuant to subsection 104-10(1). Subsection 104-10(2) states that a taxpayer will dispose of a CGT asset if a change of ownership occurs from the taxpayer to another entity. Paragraph 104-10(3)(a) provides that the timing of the CGT event will be when the contract to dispose of the asset is entered into by the taxpayer. Paragraph 104-10(3)(b) explains that if there is no contract, the time of disposal will be when the change of ownership occurred. Subsection 104-10(1) provides that CGT event A1 happens when you dispose of an asset and there is a change of ownership from one entity to another. It clarifies that a change of ownership doesn't occur if you stop being the legal owner but continue to be the beneficial owner (Subsection 104-10(2)). When considering the disposal of real property, the most important element in the application of the CGT provisions is ownership. In absence of evidence to the contrary, property is considered to be owned by person(s) registered on the certificate of title. | Detailed Reasoning - Application to your circumstances: A CGT event A1 occurred on the day Person A passed away on DD MM 19YY and you replaced them on the property title as the sole heir to his full estate. As the change in ownership occurred after 20 September 1985 this resulted in an asset losing its pre-CGT status. As you acquired the XX% interest in the asset from your spouse in 19YY which is after 20 September 1985, it was a post CGT asset from the time you took ownership. The first element of the CGT asset's cost base or reduced cost base will therefore be the market value of the asset on the day Person A passed. | Detailed Reasoning - Legal and beneficial ownership: Section 102-20 of the ITAA 1997 provides that a capital gain or capital loss results from a CGT event occurring. 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. Accordingly, when applying the CGT provisions on the sale or legal transfer of property, you must consider ownership and determine if equitable ownership differs from legal ownership. An individual can be a legal owner but have no beneficial ownership in an asset. This will ordinarily occur where the property is held on trust. To establish occasions where legal and equitable ownership are not the same (i.e. a trust), there needs to be evidence to rebut the standard presumption that legal and equitable interests are the same. 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 in Muschinski v. Dodds [1985] HCA 78 explained the relevance of 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 p 365). In the absence of clear and compelling evidence to the contrary, the property is owned by the people registered on the title. Trusts may be of three kinds: express, constructive, or resulting. | Detailed Reasoning - 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. It is necessary that there is certainty of the intention to create a trust, subject matter, and the object of the trust. | Detailed Reasoning - 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. | Detailed Reasoning - Resulting or implied trusts: On the purchase of real property, a resulting trust may be presumed 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 [1984] HCA 81). If a resulting trust arises, the party, or parties, who hold the legal title is, or are, presumed to hold the property upon resulting trust in favour of those who contributed to its purchase cost. That is, 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. | Detailed Reasoning - Application to your circumstances: Although requested and sort there has been no documentation or evidence brought forward that clearly shows a trust (Express, Constructive or Resulting) existed over the XX% ownership in the apartment complex. We consider that you have insufficient evidence to establish that the equitable interests in the property were different from the legal title. It is taken a CGT event A1, occurred under section 104-10 of the ITAA 1997 to Person A's Estate when you acquired the XX% legal and beneficial ownership of the property on DD MM 19YY. A CGT event A1 occurred on the day Person A passed away on DD MM 19YY and you replaced them on the property title as the sole heir to his full estate. As the change in ownership occurred after 20 September 1985 this resulted in an asset losing its pre-CGT status. As you acquired the XX% interest in the asset from Person A in 19YY which is after 20 September 1985, it was a post CGT asset from the time you took ownership. | Detailed Reasoning - Cost Base: Subdivision 110-A of the ITAA 1997 contains the rules for working out the cost base of a CGT asset. Section 110-25 of the ITAA 1997 provides the general rules regarding cost base. The cost base consists of five elements: • Acquisition costs (the money you paid, or are required to pay, in respect of acquiring it) • Incidental costs • Non-capital ownership costs which are not deductible elsewhere • Amounts which increase or preserve the value of the asset • Amounts incurred in establishing, preserving or defending your title to the asset, or right over the asset You should note that the first element of your cost base for the property is its market value on the deceased's date of passing. | Detailed Reasoning - Partial main residence exemption: If a CGT event happens to a dwelling you acquired on or after 20 September 1985 and that dwelling was not your main residence for the whole time you owned it, you will only be eligible for a partial exemption on the disposal of the dwelling. The main residence only applies to the interest you had in the unit you resided in from 19YY to 19YY, as the interest was held in partnership, your interest in this unit, as with the other units was XX%, and the capital gain must be apportioned between all of the units and the adjacent land. When calculating the cost base for a main residence, section 118-192 of the ITAA 1997 holds a special rule that applies if: • you would only get a partial main residence exemption for a CGT event happening in relation to your ownership interest in a dwelling because the dwelling was used for the purpose of producing assessable income during your ownership period; and • the use occurred for the first time after 7:30pm, by legal time in the Australian Capital Territory, on 20 August 1996; and • you would have had a full main residence exemption if the CGT event had happened just before the first time it was used for income producing purposes during your ownership period. When the above requirements are met, you are taken to have acquired the dwelling at its market value just before the time it was first used to produce income. This impacts on the first element of your cost base or reduced cost base calculation. However, as the property was first used to produce income prior to 7:30pm, by legal time in the Australian Capital Territory, on 20 August 1996, the special rule will not apply. In that situation, the capital gain is calculated using the following formula: • Capital gain x Non main residence days / Days in your ownership period. | Detailed Reasoning - Indexation and Discount method: If you acquired an asset before 21 September 1999, you may index its cost base for inflation to reduce capital gains. If your asset is eligible for indexation, it is probably also eligible for the 50% CGT discount for individuals. You can use whichever of these methods gives you the best result (the lowest capital gain), but not both. In most cases the discount will give you the best result. Indexation may give you a better result in some situations, such as if you also have capital losses. As the property was held for over 12 months, you have the option of either method.