Recent Decision finds - No 'CGT Main Residence Exemption' for trust benficiary.

A taxpayer applied to the Federal Court arguing that a capital gain made by a discretionary trust (and distributed to the taxpayer) from the sale of a property, was exempt from CGT, due to the “main residence” exemption. The Federal Court held that the capital gain should be included in the assessable income of the taxpayer. See Mingos v Commissioner of Taxation [2019] FCA 834.

The facts are as follows:

  • 1992: The property was purchased by Company A on trust for the taxpayer. It was the taxpayer’s main residence.

  • 16 November 2006: Company A transferred the property to the taxpayer. The consideration was stated as “entitlement in equity”.

  • 16 November 2006: The taxpayer transferred the property to his wife. The consideration was stated as “natural love and affection”.

  • Shortly after 16 November 2006: The marriage began to breakdown.

  • November 2010: The taxpayer and his wife entered into a property settlement.

  • 23 December 2010: Final orders made by consent by the Federal Magistrates Court. The orders provided that the wife was to “do all such acts and things and sign such documents, at the expense of the [taxpayer], to transfer to [him] or his nominated entity all her right title and interest in [the property].” The taxpayer was obliged to discharge the mortgages secured over the property.

  • On 27 May 2011: The wife, at the taxpayer’s direction, transferred the property to Company B as trustee for Trust B. The taxpayer was a discretionary beneficiary of Trust B.

  • May 2014: The property was sold.


The Court held:

  • The taxpayer did not discharge the onus on him of proving he had an ownership interest in the property.

  • The Orders did not vest an equitable interest in the property to the taxpayer.

  • The transfer by the wife to Company B did not constitute a mortgage of Torrens title land by absolute transfer, vesting the legal title in Company B as mortgagee and leaving the taxpayer (mortgagor) with an unregistered equitable interest in the land.

  • Upon transfer of the property to Company B by the wife, Company B did not hold the property on a resulting trust or constructive trust for the taxpayer.

  • The taxpayer did not establish that he had an absolute entitlement to the property as against Company B.

  • The taxpayer did not discharge the onus of proof that the capital gain on which he was assessed is excessive.

  • The penalty was correctly imposed, and no error was discernible in the Commissioner’s refusal to exercise the discretion to remit the penalty.

  • The taxpayer has lodged an appeal to the Full Federal Court from the decision of Davies J.


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