The AAT has affirmed the Commissioner’s decision to assess a taxpayer in 2008 on 50% of the net capital gain arising from the sale of a town-house. It did so on the basis that the interest in the town-house was not held on trust for his son, and the principle place of residence exemption did not apply.
The taxpayer purchased a town-house in 2002 for his adult son to reside in and transferred the property to himself and his son as joint tenants. The taxpayer’s son lived in the property until 2007 when he moved to another property. The town-house was then sold and the entirety of the funds used to reduce the mortgage on the new property. The taxpayer contended that he should not be subject to CGT on the sale of the town-house as he was only a joint tenant to protect his inexperienced son from selling the town-house on a whim and received no proceeds from the sale. He further contended that he held his interest in the town-house in trust for his son, and failing that, the main residence exemption should apply.
The AAT held that the taxpayer is deemed to have received the proceeds under s 103-10 of the ITAA 1997 as he made a decision to use the proceeds to reduce his son’s debt.
In relation to the trust issue, it held that there was no written declaration of trust, nor was there words or conduct from which an intention to create a trust could be inferred. For completeness, the Tribunal also found that the facts did not support a finding of a constructive trust of the taxpayer’s interest in the property.
In addition, it held that as the taxpayer did not reside in the town-house himself, he was not eligible for the main residence exemption. In conclusion, the Tribunal held that as a joint tenant, the taxpayer was liable for 50% of the net capital gain.
(AAT Case [2013] AATA 664, Gerbic and FCT, AAT, Ref No 2013/2146, Molloy DP, 17 September 2013.)
[LTN 181, 18/9/13]