When families help each other buy property or transfer ownership, it often feels like a simple personal arrangement. But for tax purposes—especially Capital Gains Tax (CGT)—these decisions can have unexpected consequences. Recent ATO rulings highlight the importance of distinguishing between legal ownership (whose name is on the title) and beneficial ownership (who actually benefits from the property).
Below is a simple breakdown of what the ATO is focusing on and what families should keep in mind.
1. Legal vs Beneficial Ownership
For CGT purposes, the ATO looks beyond whose name appears on the property title. Instead, they ask:
- Who paid the deposit?
- Who pays the mortgage and expenses?
- Who uses or benefits from the property?
Suppose there is no clear documentation to show that someone is holding the property on behalf of another person (such as a trust). In that case, the ATO generally assumes the owner on the title is also the true economic owner.
This distinction is critical when property interests are transferred.
2. When Parents Go on the Title to Help a Child
It’s common for parents to be added to a title and a loan to help an adult child secure financing. However, even if the intention is to assist, the ATO may still treat the parents as owning part of the property if:
- They are co-borrowers (not just guarantors)
- They are on the legal title
- They are jointly liable for the debt
If the parents later transfer their interest to the child—even for no money—this can trigger CGT Event A1, meaning the parents may have to pay CGT on their share.
Good intentions don’t cancel out the tax consequences unless they are backed by proper documentation from the beginning.
3. When Spouses Change Ownership Between Themselves
Another common scenario is when a spouse adds the other spouse to the title of a property. Many assume this is tax-free—but that’s not always the case.
The ATO will look at:
- Who originally owned the property
- Who paid the purchase costs
- Who received the rental income
- What records and documents actually show
If the ATO finds that one spouse was the actual owner all along, then transferring a share to the other spouse is treated as a disposal that triggers CGT.
Importantly:
- Once a CGT event occurs, it cannot be reversed.
- The ATO cannot unwind the transfer.
- CGT cannot be deferred until sale or death unless specific rollover provisions apply—most of which do not apply to voluntary transfers between spouses.
4. Key Takeaways for Families
✔ Being on the title matters
If your name is on the title (and loan), the ATO may treat you as an owner—even if you never lived in the property.
✔ You need evidence to show that someone is only holding property as a helper
A trust or agreement must be documented at the time of purchase—not years later.
✔ Transfers between family members often trigger CGT
Even if no money changes hands.
✔ CGT events cannot be undone
Once a share of property is transferred, the tax outcome is locked in.
✔ Always get advice before changing ownership
A simple change on paper can create a significant tax cost.
In Short
Property transactions within families can create real tax obligations. The safest approach is to document intentions clearly at the outset and seek advice before making any changes to ownership. A few careful steps early on can prevent costly surprises later, so please don't hesitate to call our Melbourne team on (03) 9870 9050 for an obligation-free chat.
