Did capital gains tax (CGT) event A1 happen to you when you disposed of the Property which was registered solely in your name?
Yes. This ruling applies for the following periods : Year ended 30 June 19xx to year ended 30 June 2xx The scheme commenced on: 1 July 19xx
You are the daughter of Parent 1 and Parent 2. You are a non-resident of Australia for taxation purposes. You are the legal owner of a residental property in Australia (the Property). Purchase of the Property You executed a 'Contract for Sale of Land by Offer and Acceptance' to purchase the Property around 30 years prior to its disposal in a recent income year. The purchase price was funded by way of: An initial deposit; and a loan of from an Australian lending institution (the Bank) payable upon settlement. You have stated that the deposit was funded by the proceeds of the sale of Parent 1 and Parent 2's former home; however, you have not provided any evidence to confirm that statement. You paid the balance of the purchase price of the property with the funds you obtained in an investment housing loan from the Bank. You were registered on the Certificate of Title as sole legal owner of the property. Payment of Mortgage on Property You have made several statements regarding the payment of the mortgage:
You have stated that throughout the term of the Bank's loan, the loan was generally paid from bank accounts owned or controlled by Parent 1 and/or Parent 2, with the following notable exception: - You have stated that roughly ten years after purchasing the property you made a one-off loan repayment from a bank account owned by you and your husband. You have provided a bank statement from your overseas bank account showing a foreign transfer for this amount; however, you have not provided evidence to confirm that this payment was used to pay down the mortgage. - You stated that this payment reduced the outstanding balance of the Bank's loan to a negligible amount but did not extinguish the mortgage over the property. - You stated that your intention was for this payment to be a gift from you to Parent 1. You also stated that you did not wish to clear the entirety of the loan at this time (and thereby release the mortgage registered over the Property) so as to prevent Parent 2 from being able to pressure Parent 1 to undertake any transactions with respect to the Property.
You have stated that you frequently provided financial support to Parent 1 and transferred money for their benefit on a periodic basis over the past 30 years. You believe that some of that money may have been used to contribute to the mortgage. However, you have not provided conclusive contemporaneous evidence to confirm these statements. You have provided some incomplete cheque stubs and deposit slips and bank statements in support of your contentions regarding the mortgage repayments. However, these documents do not identify Parent 1 or Parent 2 by name. Furthermore, the bank statements you have provided indicate that the account from which the loan repayments were made is solely in your name. You have not provided documentary evidence to confirm that the loan over the property has been extinguished. Use of the Property From the date of purchase the Property had been used by Parent 1 and Parent 2 as their only place of residence until: • Parent 2 moved into aged residential care around 8 years before you disposed of the Property; and • Parent 1 moved into respite care around 9 months before you disposed of the Property.
Neither Parent 1 nor Parent 2 claimed the main residence exemption in Subdivision 118-B of ITAA 1997 in respect of any other property since the Property was purchased. The Property has not been used to derive assessable income since you purchased it. Reasons for Purchase Structure You assert that you purchased and registered the Property in your name for two main reasons: your desire to protect Parent 1's financial position from Parent 2 reckless financial behaviour; and the inability of Parent 1 or Parent 2 to obtain a housing loan in their own capacity, largely due to Parent 2's previous status as a bankrupt and their poor credit history. You sold the property shortly after Parent 1 passed away. Acknowledgement of Trust deed You have stated that your intention was to hold the Property on trust for the benefit of Parent 1; however, you have no contemporaneous documentation from the time you purchased the Property to support the establishment of a trust.
Some 20 years after the Property's purchase, you sought estate planning advice in your country of residence (Country A). At this time, you were advised that the Country A tax authorities may seek to assert that the Property formed part of your estate for the purposes of the Country A's inheritance tax. You stated that, in response to advice regarding the Country A tax authority, you executed an Acknowledgement of Trust by Deed Poll (the Acknowledgement Deed). You have provided a copy of the Acknowledgement Deed which is witnessed; however, the copy provided is not a registered and certified copy. The Acknowledgement Deed contains statements regarding your ownership of the property. The Acknowledgement Deed listed the following statements: The Acknowledgement Deed is stated to operate under the law of your jurisdiction of residence. In the Acknowledgement Deed, you listed your residential address as the Property. • The Acknowledgement Deed also lists the following statements of your intention regarding the Property: you acquired the Property in the capacity of bare trustee for and on behalf of and for the sole benefit of Parent 1
you have no beneficial interest in the Property; and you must at the request and cost of Parent 1 transfer the Property to Parent 1e, or otherwise deal with it as Parent 1 directs. the document did not establish a trust over the property at that time, instead you intended the Acknowledgement Deed to serve as a formal acknowledgement of the arrangement between yourself and Noreen. the document is stated to apply to a person's personal representatives and successors in title, i.e., upon Parent 1's death, the Acknowledgement Deed applies equally to the trustee of Parent 1's estate. The Deed was signed by a witness who was an Australian citizen.
Income Tax Assessment Act 1997 section 102-20 Income Tax Assessment Act 1997 section 104-10 Income Tax Assessment Act 1997 section 104-55 Income Tax Assessment Act 1997 section 106-50 Income Tax Assessment Act 1997 section 108-5 Income Tax Assessment Act 1997 Division 121 Income Tax Assessment Act 1997 section 121-20 Income Tax Assessment Act 1997 subsection 121-20(1) Income Tax Assessment Act 1997 section 121-25 Income Tax Assessment Act 1997 subsection 121-25(2)
Summary The capital gains tax (CGT) provisions contained in Parts 3-1 and 3-3 of the ITAA 1997 apply to you when the Property was sold. Detailed reasoning 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 of property, ownership must be considered. Legal and equitable ownership A person's legal interest in a property is determined by the legal title to that property under the property law legislation in the State or Territory in which the property is situated. In some cases, it is possible for legal ownership to differ from equitable, also known as 'beneficial' ownership. An individual may hold a legal ownership interest in a dwelling for another individual in trust. The Commissioner's position, as stated in paragraphs 41 and 42 of Taxation Ruling TR 93/32 Income tax: rental property - division of net income or loss between co-owners (TR 93/32), is that there are extremely limited
[emphasis added] circumstances where the legal and equitable interests are not the same, and that there is sufficient evidence to establish that the equitable interest is different from the legal title. Although TR 93/32 broadly deals with the division of rental income or loss between co-owners, it outlines the Commissioner's approach to considering whether legal and equitable ownership align. TR 93/32 states that capital gains or losses are divided on the same basis as net income or loss where there is a difference between legal and equitable ownership. As such, the Commissioner requires the same standard of evidence to establish that the beneficial ownership is different to the legal title in any relevant property dealings or transactions. 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 ( Muschinski
) explained the relevance of contemporaneous evidence required to establish a trust over property between two parties: 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). Heydon J and Crennan J in Byrnes v Kendle [2011] HCA 26 ( Byrnes v Kendle ) confirm that the rules for the construction of contracts apply also to trusts, stating that "the contractual relationship provides one of the most common bases for the establishment or implication and for the definition of a trust." (paragraphs 102 & 103). Their honours proceed to relate the paramount importance of retaining written evidence in contractual construction, which therefore applies to determining the establishment of a trust relationship:
For another thing, the same considerations which limit recourse to surrounding circumstances and oral testimony in relation to contracts applies in relation to trusts. In Buttery & Co v Inglis (1877) 5 R 58 Lord Gifford said: "The very purpose of the written contract was to exclude disputes inevitably arising from the lubricity, vagueness, and want of recollection, or want of accurate recollection, of mere oral conversations occurring in the course of negotiations more or less protracted."And three centuries earlier in Countess of Rutland's Case (1604) 5 Co Rep 25b Popham CJ said: "it would be inconvenient, that matters in writing made by advice and on consideration and which finally import the certain truth of the agreement of the parties should be controlled by averment of the parties to be proved by the uncertain testimony of slippery memory." The goal of excluding disputes of this kind from litigation is thwarted by recourse to the same material in order to discover the background, and that is so whether the disputes are about whether a particular contract was created or a particular trust.
These common law principles inform the Commissioner's evidentiary requirements for trusts over property. Therefore, for the Commissioner to accept that the equitable interest in a property is different from the legal title it is necessary to provide clear and compelling evidence which demonstrates that a trust has been established between the legal owner/s and the owner/s in equity. In the absence of this evidence, the Commissioner will maintain the position that the property is owned by the person/s registered on the title. Evidence/Record Keeping In complement to the common law principles previously described, there are also statutory record keeping rules for CGT assets, provided in Division 121 of the ITAA 1997. Subsection 121-20(1) provides: 121-20(1) You must keep records of every act, transaction, event or circumstance that can reasonably be expected to be relevant to working out whether you have made a *capital gain or *capital loss from a *CGT event. (It does not matter whether the CGT event has already happened or may happen in the future.) Subsection 121-25(2) provides:
121-25(2) You must retain them until the end of 5 years after it becomes certain that no *CGT event (or no further *CGT event) can happen such that the records could reasonably be expected to be relevant to working out whether you have made a *capital gain or *capital loss from the event. Therefore, you must retain any evidence which may be relevant to whether you have made a capital gain or loss from a CGT event from the time you acquired the asset until the end of 5 years after you dispose of the asset. Types of trusts 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. For an express trust to be created it is necessary that there is certainty of the intention to create a trust, subject matter and the object of the trust. While trusts can be created orally, all State Property Law Acts contain provisions that preclude the creation or transfer of interests in land except if evidenced in writing. Resulting or implied trusts
On the purchase of real property, a resulting trust may arise 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 56 ALR 483) ( Calverley v Green ). A trust is presumed in favour of the party providing the purchase money. If an individual purchases and then pays for a property, but legal title is transferred to another person at their direction, the presumption of a resulting trust arises - the property is held in trust for them. 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. The presumption of resulting trust can, however, be rebutted by the presumption of advancement. Presumption of advancement
The presumption of advancement is an equitable principle in which a person puts property in the name of another person with whom they have a close familial relationship. The presumption only applies to transfers and purchases made by people who stand in particular relationships, including parents from parents to their children. Under the presumption of advancement, the property is transferred with the intention of transferring both the beneficial interest in the property as well as the legal title. The parties hold their equitable interests in the property in the same proportions as their legal interests. Calverley v. Green outlines the following principles: • Where one person purchases property in the name of another, or in the name of himself and another jointly, it will be presumed that the first person did not intend the other to acquire a beneficial interest unless there is such a relationship between the persons as gives rise to a presumption of advancement.
• The presumption of advancement may be rebutted by evidence of the actual intention of the purchaser at the time of purchase. If two persons have contributed to the purchase and the legal interest does not reflect the proportions of their contributions, the intentions of both parties at the time of purchase are important. • The onus of rebutting the presumption of advancement lies with the person who is considered as having gifted the property to another (usually the purchaser). Evidence is required that demonstrates that the purchaser did not intend the property to be a gift to the other party. In Australia, the case of in Bosanac v Commissioner of Taxation [2022] HCA 34 ( Bosanac ) sets precedent for the contemporary interpretation of the presumption in Australia. Their honours Kiefel CJ and Gleeson held that the principles underlying the presumption of advancement have continuing application, with an acknowledgement that the presumption may be seen as an absence of reason to presume that a [resulting] trust has arisen. Summarily, the principles contemplated in Bosanac
confirm that where a husband or parent advances funds to purchase property in which the legal title is held in the name of the wife or child, it is presumed that the contribution of the advancer is intended to be for the benefit of the title holder. Furthermore, in the absence of evidence to the contrary, the presumption of advancement effectively rebuts the presumption of resulting trust, in which case the onus upon the advancer to provide evidence that a trust was in fact created in relation to their contribution to the purchase of the property. The decision in Koprivnjak v Koprivnjak [2023] NSWCA 2 ( Koprivnjak ) illustrates the application of the principles refined in Bosanac to the advancement of funds by a parent towards property in which legal title is held by their child. As well as confirming that the presumption of advancement will apply to rebut the presumption of advancement, Griffiths AJA expanded on the reasoning regarding the establishment of a resulting trust, stating that "[the advancing party] carrie[s] the onus of satisfying the Court on the balance of probabilities that: • [the advancing party] advanced money to the purchase price and costs of the property
for the purpose of a resulting trust (emphasis added); and • [the advancing party] and [the legal title holder] had the common intention that [the legal title holder] would hold the property on trust for [the advancing party]. Mortgage Repayments Calverley v Green confirms that mortgage repayments are not a component of the purchase price of a property for the purposes of a resulting trust. Mason and Brennan JJ state at paragraph 7: It is understandable but erroneous to regard the payment of mortgage instalments as payment of the purchase price of a home. The purchase price is what is paid in order to acquire the property; the mortgage instalments are paid to the lender from whom the money to pay some or all of the purchase price is borrowed. As this authoritative statement confirms, only the contributions to the sum paid from the purchaser to the vendor of the property represent the purchase price of a property. Therefore, the repayment of mortgage instalments cannot be included as components of purchase price leading to the presumption of a resulting trust.
While in theory it is possible for an implied trust to exist over property in other circumstances than a resulting trust, in practice the Commissioner will not accept the contention that an implied trust has arisen without compelling contemporaneous evidence to support the argument. However, the Commissioner will accept the existence of an implied trust when it has been constructed by the order of the court. The Commissioner's view is supported by the decision in Koprivnjak , which firstly provides a contemporary reaffirmation that mortgage repayments are not a component of the purchase price of a property, and secondly indicates that, where the presumption of advancement applies and the parent is making mortgage repayments to a property owned by their child, the courts do not consider mortgage repayments to be evidence which supports the inference of any sort of trust over the property. 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. Establishment of a trust relationship When a trust is created by declarationthe holder of the undivided legal interest in property declares their intention to create a trust over that property ( Korda v Australian Executor Trustees (SA) Ltd (2015) 317 ALR 225; [2015] HCA 6). This will often be performed through the execution of a trust deed but may occur without a trust deed being prepared or executed. Conversely, a trust created by settlementis created by vesting property subject to a trust for the benefit of others ( Taras Nominees Pty Ltd as Trustee for the Burnley Street Trust v FC of T 2014 ATC). Again, this will often be done by execution of a trust deed but may occur without a trust deed being executed.
A declaration and a settlement are not mutually exclusive, and there are many situations where both will occur during the settlement of a trust. For example, the holder of an unencumbered parcel of land may first declare that they hold the land on trust for a particular beneficiary and then settle the property on a trustee. Most trusts created under Australian law are done so deliberately and are formed involving three parties: a. the settlor, who creates the trust; b. the trustee, who holds the legal interest in the trust property and who administers the trust; and c. the beneficiary, who holds the equitable interest in the trust property, who enjoys the trust but who also acts as an 'enforcer' of the trust, ensuring that the trustee honours the terms of the trust. Trusts that are formed deliberately, or expressly, generally do not have to comply with any requirements as to form. This means they may be created orally.
However, all State Property Law Acts contain provisions that preclude the creation or transfer of interests in land except if evidenced in writing. For the State in which the Property is located this is provided in paragraph xx of the relevant Property Law Act: a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will. This requirement is modified by subsection xx of the relevant Property Law Act, which states: This section does not affect the creation or operation of resulting, implied or constructive trusts. Subsection xx of the relevant Property Law Act consequently permits resulting, implied, or constructive trusts to be legally effective without executing a written declaration of trust over real property. Execution of an Acknowledgement of Trust by Deed All expressly created trusts over land in Western Australia must be evidenced in writing in accordance with paragraph xx of the Property law Act. The ratio decidendi in Byrnes v Kendle
provides precedent for the position that an Acknowledgement of Trust by deed may establish a trust over property. Heydon J and Crennan J have stated in this regard at paragraphs 117 and 118: 'Did the ... Acknowledgment of Trust create a trust? The opening language twice described it as a trust. Clause 1, a key operative provision, used the language of trust. These indications, not countered by any other aspect of the document (emphasis added), are more than sufficient to support the conclusion that it was a trust. But there are surrounding circumstances known to the parties pointing to that conclusion as well. ... the parties acknowledged that their respective entitlements to interests (created under a prior trust) in [a prior asset] transferred into interests in [the new asset] which had been purchased with the proceeds of sale of [the prior asset].... Nothing in either Acknowledgment of Trust points against the existence of a trust. Thus the ... Acknowledgment of Trust created a trust. The factual matrix and judgement presented in Byrnes v Kendle
includes the following elements which restrict the application of the decision made at paragraph 118 to the specifics presented in the case: The terminology used in the deeds make no reference to having retrospective application prior to their execution The judges make no reference to the Acknowledgement of Trust having retrospective application prior to the execution of the deed The ratio decidendi has no retrospective application prior to the execution of the deed Byrnes v Kendle concerns a purported beneficiary of a trust taking action against a purported trustee. The common law understanding is that terms of a trust deed which may be binding upon the parties to the trust are not binding on third parties such as revenue authorities ( FCT v Shell Energy Holdings Australia Limited [2022] FCAFC 2). Bare trusts
A trust is a bare trust where the trustee has no interest in the trust assets other than that existing by reason of the office of trustee and the holding of the legal title to the assets. In a bare trust the trustee does not have active duties to perform or has ceased to have those duties so that in either case the property is merely awaiting transfer to the beneficiary or to another party at the direction of the beneficiary ( Herdegen & Anor v Federal Commissioner of Taxation 88 ATC 4995; (1988) 84 ALR 271). A trustee cannot make any decisions or have any rights regarding the assets in a bare trust and must deal with the assets strictly at the beneficiary's direction, as the beneficiary remains absolutely entitled to the assets of a bare trust. Meaning of 'absolutely entitled' The Commissioner's views on the meaning of the words "absolutely entitled to a CGT asset as against the trustee of a trust" as used in the CGT provisions are set out in Draft Taxation RulingTR 2004/D25 Income tax: capital gains: meaning of the words 'absolutely entitled to a CGT asset as against the trustee of a trust' as used in Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997.
TR 2004/D25 explains the circumstances in which a beneficiary of a trust is considered to be absolutely entitled to a CGT asset of the trust as against the trustee. In such circumstances, the beneficiary (rather than the trustee) is treated as the relevant taxpayer in respect of the asset for the purposes of the CGT provisions and especially section 106-50 of the ITAA 1997. The core principle underpinning the concept of absolute entitlement is the ability of a beneficiary who has a vested and indefeasible interest in the entire trust asset to call for the asset to be transferred to them or to be transferred at their direction. See the rule in Saunders v Vautier (1841) 4 BEAV 115; 79 ER 282. The Commissioner's views on the meaning of 'absolutely entitled...' accord with Edmond J's comments in Oswal v. Commissioner of Taxation [2013] FCA 745 ( Oswal ), in which Edmond J found that the phrase 'absolutely entitled to a CGT asset of a trust... as against the trustee' requires a beneficiary to have a vested, indefeasible, and absolute entitlement to a trust asset and to be entitled to require the trustee to deal with the asset as the beneficiary directs. In Oswal
, the trustee's statutory right of sale of trust property meant that the beneficiaries' interests 'while absolute were defeasible'. Edmond J also held that the trustee's right of indemnity was an impediment to absolute entitlement as against the trustee. The most straightforward application of the core principle is one where a single beneficiary has all the interests in the trust asset. Generally, a beneficiary will not be absolutely entitled to a trust asset if one or more other beneficiaries also have an interest in it. A single beneficiary who has all the interests in a trust asset will be absolutely entitled to that asset as against the trustee for the purposes of the CGT provisions if the beneficiary can (ignoring any legal disability) direct the trustee to transfer the asset to them or to transfer it at their direction. CGT event happens to a trust asset to which a beneficiary is absolutely entitled Section 106-50 provides that, immediately after a beneficiary becomes absolutely entitled to a CGT asset as against the trustee (disregarding and legal disability): a. the asset is treated as the beneficiary's asset (and not the asset of the trust); and
b. an act done in relation to the asset by the trustee is treated as if it had been done by the beneficiary (and not by the trustee). Therefore, if a beneficiary is absolutely entitled to a CGT asset as against the trustee of a trust, the CGT provisions apply to the beneficiary of the trust, not the trustee. CGT event E1 CGT event E1 happens if a taxpayer creates a trust over a CGT asset by declaration or settlement (subsection 104-55(1) of the ITAA 1997). The CGT event happens if the trust was created between living persons or under the Will of a deceased person. However, there are some situations in which CGT event E1 does not happen. CGT event E1 does not happen where a taxpayer is the sole beneficiary of the trust and is absolutely entitled to the asset against the trustee (disregarding any legal disability) (paragraph 104-55(5)(a) of the ITAA 1997).
If CGT event E1 does not happen because of this exception and the taxpayer is absolutely entitled to the asset as against the trustee (disregarding any legal disability), the CGT provisions apply to an act done by the trustee in relation to the asset as if it were done by the taxpayer (section 106-50 of the ITAA 1997). This means, for CGT purposes, the asset effectively continues to be owned by the taxpayer and not the trustee of the trust. For example, if the asset is sold by the trustee, any capital gain or loss from CGT event A1 (disposal of a CGT asset - section 104-10 of the ITAA 1997) arises in the hands of the beneficiary/taxpayer and not in the hands of the trustee. Application to your circumstances Was a trust established at the time you purchased the property in 1992?
The Commissioner's starting point is that legal and equitable interests are equivalent unless there is sufficient evidence to demonstrate that the equitable interest varies from legal interest. Furthermore, the statutory CGT record keeping provisions contained in Division 121 of the ITAA 1997 require you to retain records of every act, transaction, event or circumstance that can reasonably be expected to be relevant to working out whether you have made a capital gain or loss from a CGT asset until 5 years after its disposal. You did not register a written declaration of trust over the property at the time you purchased it, therefore, in accordance with the Property Law Act, only a resulting, implied or constructive trust can be effected to vary the equitable ownership from legal title to the property.
You have stated that you purchased the Property on trust for Parent 1. However, you have provided no contemporaneous documentation from the time the property was purchased to support this arrangement. The property was purchased by you as sole owner, with a loan from the Bank in your name. The Commissioner acknowledges that you have provided cheque stubs transferring money into the account from which mortgage repayments were made, which was in your name only. Furthermore, the cheque stubs do not confirm who made the payments into the account from which mortgage repayments were made. Regardless of who made the mortgage repayments, the repayments do not represent a component of the purchase price ( Calverley v Green (1984) 155 CLR 242, at 257). Mortgage payments can be relevant, but only as peripheral context which supports a broader set of facts including contemporaneous evidence of intentions of the parties at the time of acquiring the property.
In justification of the desire to create a trust over the Property you have provided evidence of Parent 2's bankruptcy some years prior to the purchase of the Property, and illustrated an ongoing history of your parents' problems in maintaining home ownership and the difficulties with Parent 2's financial irresponsibility.
We accept that this is a reasonable motivation to protect the security of Parent 1 by ensuring your parents had a home to live in whilst ensuring it was protected from the financial risk you felt Parent 2 may pose. However, the lack of contemporaneous evidence from the time of the Property's purchase results in insufficient information to distinguish between an intention for it to be held on trust, or to provide a right to reside or life interest, or simply representative of a private and domestic arrangement between family members. It is unclear whether you turned your mind to the ownership of the property, who had control over decisions made in relation to the property, whether your mother could call for the property to be transferred to her at any time, or upon meeting contingencies, and any arrangements regarding the steps that would be taken upon any of the parties becoming incapacitated, death, or failure to meet the loan obligations. You have also contended that the following actions you have taken with respect to the property show that a trust was established when you purchased the property:
You have not obtained any rent from the Property at any time since the property's purchase. While this fact does not contradict the notion that a trust was established over the property, is not a requirement for you to receive income from a property in order to have an equitable interest in it. The decision not to require rent from a family member can equally be characterised as a private and domestic arrangement, a gesture made out of love and affection. You also refer to the documentation lodged in recent years with another public entity which accepted that the Property belonged to Parent 1, this acceptance doesn't illuminate an intention to form a trust over the property when it was purchased, over 30 years before this occurrence.
In the absence of contemporaneous evidence from the time of the property's purchase, this peripheral evidence is not sufficient to demonstrate that a trust was established over the property when you purchased it. Without contemporaneous documentation it is not possible to identify what the terms were, whether any contingencies existed, and what point, if any, Parent 1 was or would be absolutely entitled to the Property or hold beneficial ownership of the property. Furthermore, the record keeping provisions of subsections 121-20(1) and 121-25(2) of the ITAA 1997 require you to keep records of 'every act, transaction, event or circumstance' relevant to whether you made a capital gain or loss on the disposal of the property. As you have not met the statutory record keeping requirements with regards to the property, the declarations and assertions you have made long after the fact and the absence of contemporaneous documentary evidence, are not sufficient for the Commissioner to accept that the legal and equitable interests in the property do not align. The Administrative Review Tribunal's decision in Nguyen and Commissioner of Taxation (Taxation and business) [2025] ARTA 173 ( Nguyen
) reaffirms that in cases such as yours where there is no contemporaneous evidence from the time the property was purchased to prove that the establishment of a trust was contemplated at that time, later statements and declarations may not be held to represent anything more than the taxpayer's recollections of the way a situation existed at a previous point in time. The ART also noted that while written documentation evidencing a trust is not legally required to be contemporaneous with the transaction that created it, a significant lapse of time between the events that occurred at the time of the property's purchase and the production of a written document will be strongly influential as to the document's weight in providing any evidence of intention. While it may be possible that a trust was indeed established at this time, this exists as one possibility amongst a number of equally plausible situations, including the purchase and use of the property being characterised as a private and domestic family arrangement between you and your parents involving a demonstration of filial piety on your part. Resulting trust
For a resulting trust to exist you must show that Parent 1 contributed to the purchase price of the property, which (disregarding the presumption of advancement) would result in Parent 1's equitable interest in the property being equivalent to their proportional contribution to the purchase price. Your position is that a resulting trust has arisen as Parent 1 (and Parent 2) are believed to have provided the funds for the initial deposit. However, you were not able to provide evidence of the source of the deposit. You are also of the view that the repayments they are stated to have made are contributions towards the purchase price of the property. This position is incorrect. In accordance with the principle stated in Calverley v Green , the contributions to the purchase price of the property comprise the initial deposit paid for the property, and the funds loaned from the Bank in satisfaction of the contracted sale price. Mortgage repayments are not a contribution to purchase price. As no evidence has been provided to show that Parent 1 has contributed to the purchase price of the property, the presumption of resulting trust does not arise in your case.
Furthermore, although a resulting trust did not arise in your case, for completeness we note that if you had provided evidence that Parent 1 contributed to the purchase price such that a resulting trust could have arisen, the presumption of advancement would have displaced the presumption of resulting trust. As such, the component of the purchase price contributed by Parent 1 would have been held to be advanced for your benefit and the equitable interest would remain in accordance with the legal title, as affirmed by the decisions in Bosanac and Koprivnjak . Bare trust & absolute entitlement You also suggested that the Property was held on bare trust for Parent 1. For a bare trust to have been established over the Property, you must have had no interest in the property other than to transfer legal title of the property into Parent 1's name at their request, or otherwise dealt with as per their instructions.
You have firmly stated that you exercised control over the property in retaining the mortgage to prevent the Property from being sold, including ensuring that an amount remained on the mortgage over the property to ensure that Parent 1 would not request that the Property's title be transferred into their name under pressure from Parent 2 in order to access the equity in the Property for financially reckless purposes. This degree of control and interest in the Property is contradictory to the purported existence of a bare trust arrangement in which the trustee merely holds the legal title to the trust assets. You also raised the issue of absolute entitlement. Even in the hypothetical scenario in which we were to accept that there was a trust of some description established over the property, the degree of control you retained over the Property is also, by extension, contradictory with the notion that Parent 1 was absolutely entitled to the Property. In the case of Oswal
, Edmond J found that the phrase 'absolutely entitled to a CGT asset of a trust... as against the trustee' requires a beneficiary to have a vested, indefeasible, and absolute entitlement to a trust asset and to be entitled to require the trustee to deal with the asset as the beneficiary directs. In Oswal
, the trustee's statutory right of sale of trust property meant that the beneficiaries' interests 'while absolute were defeasible'. Edmond J also held that the trustee's right of indemnity was an impediment to absolute entitlement as against the trustee. In your case, you stated that the purpose of the loan and property being in your name was to protect Parent 1's financial position from the reckless financial behaviour of Parent 2. This included maintaining control over the property to ensure you could prevent the property being dealt with by Parent 1 under pressure from Parent 2. This control you have stated that you retained over the sale of the property would make any interest Parent 1 may have had in the assets of a trust over such property defeasible in the sense explained by Edmond J, which negates the argument that Parent 1 was absolutely entitled to the property for the purposes of section 106-5 of the ITAA 1997. Acknowledgement of Trust by Deed
The Acknowledgement Deed you have submitted states explicitly that the document does not create a trust over the property, instead serving as a formal acknowledgement of a previously existing trust established when you purchased the property. The copy of the Acknowledgement Deed you provided has not been lodged at the relevant titles office in Australia, nor have you stated whether this has occurred at any point in time. This position is in clear contrast to the factual matrix of Byrnes & Kendle , in which the Acknowledgement of Trust deed they had created was legally executed, satisfying the requirements of property law legislation in their State. Also, the wording of the Acknowledgement of Trust in Byrnes & Kendle clearly established a trust over the property upon execution of the deed, and there was no retrospective application of their Acknowledgement of Trust prior to its registration over the property. Therefore, as the document itself clearly states, your Acknowledgement Deed did not create a trust over the Property at the time the Deed was created. Furthermore, as explained in Muchinski and affirmed in Koprivnjak,
"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" are the relevant acts and declarations to establish a trust over property. Nguyen reaffirms that the effluxion of time between the property's purchase and later creation of a document purporting to establish a trust will diminish or negate any evidentiary power of the later created written documentation. On this basis, the Commissioner does not accept that the deed is evidence that a trust was established in when you purchased the property. CGT Event E1 We acknowledge that you have not requested a decision as to whether CGT event E1 (ITAA 1997 section 104-55) may arise in relation to the Acknowledgement Deed, however for completeness we have contemplated the possibility that it may have created a trust over the Property in the same manner as Byrnes v Kendle . The salient difference between the Acknowledgement of Trust in Byrnes v Kendle (the Byrnes Deed) and your Acknowledgement Deed is that the Byrnes
Deed was executed around the time it was created, and it clearly stated that it was a deed creating a trust over the property. Due to the wording and the execution of the Byrnes deed their Honours held that the Byrnes deed established a trust over the property. This is in clear contrast to your Acknowledgement Deed which states that it did not constitute a transfer and was merely an acknowledgement of a previously existing trust relationship. We also note that (as you acknowledged in the Deed) had you established a trust over the Property you would have been required to address the taxation implications of the transfer. The fact that you did not report CGT or request a decision regarding the tax outcome of the transfer supports the finding that the Acknowledgement Deed did not create a trust over the property. Based upon this analysis the Commissioner's position would be that CGT event E1 did not occur at this time. Conclusion
You have not provided sufficient evidence to show that a trust was established conferring equitable ownership of the Property upon Parent 1 at the time it was purchased, nor at any time during your ownership of the Property. As such, the Commissioner's position remains that the equitable interest in the Property is in alignment with legal title. Accordingly, as the Property's legal and beneficial owner the CGT event A1 occurred for you when you disposed of the Property, and any capital gain or loss arising in consequence of that CGT event will be reportable in your income tax return for the income year the CGT event occurred.