Did Capital Gains Tax (CGT) event A1 occur when you transferred legal ownership of the Property into your parents' names?
Yes - we determine that you have legal and beneficial ownership in the property. Therefore, any capital gain or capital loss you made from the sale of your interest in the property cannot be disregarded and must be included in your income tax return in the relevant income year. This private ruling applies for the following period: Year ended X June 20XX. The scheme commenced on: X July 20XX.
You purchased the Property in 20XX in your name only. The Property is situated on less than 2 hectares of land. It was your intention to reside in the Property with your parent, who required care. You secured a loan to acquire the Property. Your parent paid you $X for a life interest in the Property in 20XX. It was agreed between you and your parent that you would purchase the Property under your name. You and your parent signed statutory declarations outlining the agreement for a life interest in 20XX. You resided with your parent in the Property until 20XX, when you moved out to purchase a property ('the second property') with your then partner, which became your principal place of residence. Around the same time, your other parent paid you $X for a right to reside in the unit and moved into the semi-detached unit at the front of the Property. Your parent remained living in the main residence of the Property. In 20XX, you separated from your then partner and went through Family Law Court. As part of the Court proceedings, a Deed of Arrangement was formalised with the intention of protecting your parent's interest in the Property.
The Deed of Arrangement was formalised under the following conditions: • You acknowledge and agree that whilst the said property is in your sole name that you hold the same beneficially for your parents equally. • You agree not to dispose of the said Property or further encumber (by way of mortgage or security offer) the said Property unless written consent is first had and obtained from your parents. • You agree that you will on or before the expiration of X years from the date hereof, discharge the mortgage over the said Property and provide the original Certificate of Title to your parents. You also agreed to sign any transfer document should your parents have sufficient funds to transfer the said property into their names (stamp duty and legal costs). In addition to the Deed of Arrangement, the Court ordered you to pay your ex-spouse the sum of $X. You obtained loan approval to refinance your existing loan over the second property to pay this sum however the bank being the mortgagee required additional security and requested that the Property be taken as security due to it being in your sole name.
In 20XX, you moved back into the Property with your parents, and it became your principal place of residence. In early 20XX, you transferred the property into your parents' names. The property has never been used to produce income.
Income Tax Assessment Act section 102-20 Income Tax Assessment Act section 104-10 Income Tax Assessment Act section 106-50 Detailed reasoning 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. When considering the sale of property, the most important element in the application of the CGT provisions is ownership. It must be determined who had ownership of the property. An individual can be a legal owner but have no beneficial ownership in an asset. CGT event A1 occurs when you dispose of a CGT asset under section 104-10 of the ITAA 1997. The time of an A1 event is when the disposal contract is entered into or, if none, when the entity stops being the assets owner. Under subsect