Does main residence exemption applies in Trust?
Many Australians use family trusts to hold investments or property. Trusts can offer flexibility in distributing income, asset protection, and sometimes tax benefits. But trusts also come with strict rules under tax law. One area that often causes confusion is whether a beneficiary is “absolutely entitled” to trust property. This issue matters because: If a beneficiary becomes absolutely entitled, transferring the property from the trust may trigger a Capital Gains Tax (CGT) event. Some clients hope that if the property was their home, the main residence exemption might apply. Recently, the ATO released a private ruling (18 June 2025, Authorisation No. 1052367909455) dealing with exactly this issue.
ATO Private Ruling Authorisation Number: 1052367909455
6/18/20251 min read
Trusted expert insights
The Case in Brief
A family trust owned a property that had been used as the main home of the beneficiaries. The trustee later amended the trust deed to try to simplify ownership so that one beneficiary (Person 1) could claim “absolute entitlement” to the property.
The questions to the ATO were:
Did the trust deed amendment make Person 1 absolutely entitled to the property?
If so, would CGT apply when the trust transferred the property?
Could the main residence exemption apply on transfer?
The ATO’s Answers
Absolute entitlement – No.
The amendment did not give Person 1 full, uncontested ownership.
The trust deed still allowed other entities or associates to have rights, so Person 1 was not absolutely entitled.
Capital Gains Tax – Not yet.
Since Person 1 never became absolutely entitled, there was no transfer event yet.
But when the property is eventually transferred out of the trust, CGT event E7 will occur, and CGT will apply.
Main residence exemption – No.
Even though the property was lived in as a home, the exemption only applies if the owner is an individual.
Because the property was owned by a trust, the exemption does not apply.
Key Takeaway
If you hold property in a trust and are thinking about winding up the trust or transferring property to yourself, it’s essential to get professional advice first. What seems like a simple amendment can have big tax consequences.