The Administrative Appeals Tribunal (AAT) has held that a taxpayer who jointly owned a townhouse with his son (who lived there) was liable for CGT on his share of the property when it was sold.
In April 2002, the taxpayer purchased a townhouse for his adult son to reside in, but he had both of them registered on the title of the property, to “guard against his son acting unwisely”.
His son lived in the townhouse until 2007, when he moved into another house, and in September 2007 the townhouse was sold and the proceeds from the sale were used to reduce the son’s debt to the bank for the second house.
The taxpayer was assessed for the 2008 income year for CGT on 50% of the net capital gain arising from the sale of the townhouse.
Reasons for Decision
The taxpayer claimed that:
- it was never his intention to profit from the sale of the townhouse, and that “he only went on the title to protect his ‘inexperienced’ son of 23 years from doing something ‘silly’ and selling the townhouse on a whim”; and
- he did not receive any of the proceeds of sale of the townhouse (as the entire net amount received went towards reduction of his son’s loan).
However, the AAT stated that these matters did not alter his liability, as:
- for CGT purposes, a person is treated as having received money if it is applied as he or she directs;
- to be eligible for the ‘main residence exemption’ in respect of his liability for CGT on disposal of his interest in the property, the taxpayer would have had to reside in the townhouse himself; and
- there was no evidence that the taxpayer held his interest in the property ‘on trust’ for his son.