Private ruling: Capital gains tax - marriage breakdown rollover
Date of advice: 16 December 2025
Published: 9 February 2026
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can you disregard any capital gain or capital loss made on the disposal of your interests in the investment properties under section 126-5 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No.

Relevant facts and circumstances: You were married to Person A. You and Person A jointly owned the following properties: • Property A, your marital home • Property B, an investment property; and • Property C, an investment property. You and Person A permanently separated. Some months later, a contract for the sale of Property B was entered into. A firm engaged in relation to the sale of Property B (Company X) sent an email to you and Person A to confirm the settlement on the sale of Property B had occurred, with the net proceeds from the sale being deposited into a trust account (the Trust Account). Some months later, a contract was entered into for the sale of Property C. Company X issued a tax invoice to you and Person A for their services. Company X sent an email to you and Person A advising that the settlement on the sale of Property C had occurred, with the net sale proceeds being paid into the Trust Account. Their costs had been paid from the sale proceeds. You and Person A had not concluded any settlement negotiations, nor drafted any terms of settlement that had been mutually agreed upon prior to the sale of Property B or Property C (collectively referred to as the Properties). You had not wanted to sell the Properties and felt pressured into selling them due to the nature of your relationship with Person A and their desire to sell the Properties. Several months after the settlement on the sale of Property C had occurred, a court order was issued in relation to your and Person A's property settlement which included the following information: • Person A was to transfer their interest in Property A to you within a specified period, and you were to pay Person A a specified amount at the same time. • If you did not comply in relation to paying Person A the specified amount, Property A was to be sold, with the specified amount to be paid to Person A from the sale proceeds. • The funds held in the Trust Account were to be released within a specified period to Person A's solicitor's trust account; and • You were to receive all property in your name in Australia and in a specified overseas country, motor vehicles in your name, some household contents in Property A, and your interest in any company. Company X sent you a letter in relation to your property settlement with Person A which included the following information: • Person A was to transfer their interest in Property A to you and you were to pay Person A the specified amount by a specified date. • It was confirmed that the funds held in the Trust Account had been paid to Person A after the final payment had been made to an overseas valuer, with costs in relation to valuations for various assets being taken from the account as agreed; and • The effect of the settlement was that you had received a higher percentage than Person A in relation to the property settlement.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 subsection 103-10(2) | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 108-5 | Income Tax Assessment Act 1997 section 108-7 | Income Tax Assessment Act 1997 section 126-5

Reasons for decision: Detailed Reasoning - Capital gains tax and marriage breakdown rollover: Generally, capital gains tax (CGT) applies to all changes of ownership of assets on or after 20 September 1985. You make a capital gain or capital loss if CGT event happens. The most common event is CGT event A1 which occurs when you dispose of your ownership in a CGT asset to another entity under section 104-10 of the ITAA 1997, such as when you sell a property. The time of the event is when the disposal contract is entered into, or if there is no contract, when the actual change of ownership occurs. However, if you transfer an asset or an interest in an asset to your spouse as a result of the breakdown of your marriage or relationship, there is automatic rollover in certain cases if the transfer occurred because of a binding agreement. The roll-over allows the transferor spouse to disregard a capital gain or capital loss that would otherwise arise. Subsection 126-5(1) of the ITAA 1997 provides that there is a roll-over if a CGT event happens involving an individual and his or her spouse or former spouse because of one of the following binding agreements: a) a court order under the Family Law Act 1975 (FLA) or under a state law, territory law or foreign law relating to breakdowns of relationships between spouses b) a maintenance agreement approved by a court under FLA section 87, or a corresponding agreement approved by a court under a corresponding foreign law c) before the 20xx-xx income year, a court order under a state law, territory law or foreign law relating to de facto marriage breakdowns d) something done under a binding financial agreement made under FLA Part VIIIA or a corresponding foreign law e) something done under an award made in an arbitration under FLA section 13H or a corresponding state law, territory law or foreign law, or f) something done under a written agreement that is binding because of a state, territory or foreign law relating to breakdowns of relationships between spouses and that prevents a court making an order about matters to which the agreement applies, or that is inconsistent with the terms of the agreement in relation to those matters, unless the agreement is varied or set aside. Taxation Determination TD1999/53 Income tax: capital gains: if a CGT asset is transferred by agreement between spouses and a court order later sanctions its transfer, was the transfer of assets made 'because of' the court order in terms of section 126-5 or 126-15 for roll-over to apply? states that a CGT asset transferred between spouses by agreement, before a court order is made under the Family Law Act 1975 or a State, Territory or foreign law relating to de facto marriage breakdowns, is not transferred 'because of' the court order. A CGT event only happens 'because of' a court order if the CGT event is caused by the court order. If a person and their spouse divide assets under a private or informal agreement, not because of a court order, a binding financial agreement, an arbitral award or another agreement or award, the marriage breakdown roll-over does not apply. This is because it is not the court order or binding financial agreement that caused the CGT event (the transfer) to happen. | Detailed Reasoning - Application to your situation: In your case, you and Person A separated and there was no reasonable likelihood of reconciliation. CGT event A1 occurred in relation to your interest in each of the Properties when they were sold. You will make a capital gain or capital loss in relation to the CGT event happening to your interests in the Properties unless there is a CGT rollover or some other legislation that allows you to disregard the capital gain or capital loss. As outlined above, to be eligible for the marriage breakdown rollover, the ownership or interest that one spouse has in an asset or an interest in an asset must be transferred to their spouse. It is stated in the ruling that: • The Properties were sold during a period of family and domestic violence, including coercive control, emotional pressure, and financial manipulation. • The sales were not voluntary, nor were they commercially motivated. • You did not receive any financial benefit from the sales. • Under the Order the entire net proceeds from the sales of the Properties were awarded to Person A. • The sale of the Properties, while occurring prior to the formal making of orders, were a direct consequence of the relationship breakdown, and the proceeds were later dealt with as part of the Family Court property settlement; and • You believe that your circumstances satisfy the requirement that the CGT event occurred 'because of' the breakdown of the marriage', even though the timing preceded the making of final orders. We appreciate your situation and your stated reason for selling your interests in the Properties, however we can only apply the current legislation when considering your eligibility to the marriage breakdown rollover. The proceeds from the sale of the Properties had been deposited into the Trust Account, which were taken into consideration when the Order in relation to your and Person A's property settlement was being considered. While the Properties may have been sold as a result of the breakdown of your marriage, their sale was not as a result of a court order or any other binding agreement, but because of actions you and Person A had privately undertaken. Additionally, the requirement for eligibility for the rollover did not occur, that is you did not transfer your interests in the Properties to Person A. In your situation there is no Commissioner's discretion, exemption, concession or legislation that would enable you to be eligible for the marriage breakdown rollover given that you had not transferred your interests in the Properties to Person A but had sold them to an unrelated party. After considering the facts of your situation it is viewed that you are not eligible for the marriage breakdown rollover under section 126-5 of the ITAA 1997. Therefore, the marriage breakdown rollover will not apply to enable you to disregard any capital gain or capital loss made in relation to the disposal of your interests in the Properties. Note: As you are not entitled to the marriage breakdown rollover, the general CGT provisions will apply when determining whether you had made a capital gain or capital loss in relation to the disposal of your respective interests in the Properties. For CGT purposes you are viewed as having received the capital proceeds from the sale of each of the Properties under subsection 103-10(2) of the ITAA 1997, being the sale proceeds in relation to the disposal of your interest in each of the Properties. While the sale proceeds were paid into the Trust Account, they had been paid into the account at your direction and with your authority rather than being paid directly to you. If you meet the conditions in Division 115 of the ITAA 1997, you will be able to apply the CGT discount to any capital gain you make in relation to the disposal of your interest in the respective property.