Private ruling: Marriage breakdown rollover
Date of advice: 28 September 2016
Published: November 2016
Ruling period: Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021
Date scheme commenced: 1 July 2016

Ruling: Q1: If, as a result of a court order under the Family Law Act 1975 , or because of another reason specified in 126-15(1) of the Income Tax Assessment Act 1997 (ITAA 1997), the assets are transferred to you, will the marriage rollover provisions apply allowing the assets to retain their pre-CGT status? | A1: Yes

Relevant facts and circumstances: You are separated from your spouse and there is no reasonable likelihood of cohabitation being resumed. You are a primary beneficiary of the trust. Company A is the trustee of the trust. Company A, as trustee for the trustee, acquired assets prior to 20 September 1985. There have been no events or actions (such as a change in ownership interests) that have altered the pre-CGT status of the assets, nor are any contemplated or likely. You and your spouse intend to apply for court orders made pursuant to the Family Law Act 1975 by consent that Company A transfer a percentage of the trust assets to you

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 126-5 | Income Tax Assessment Act 1997 Section 126-15

Reasons for decision: Summary: As a general rule, capital gains tax (CGT) applies to all changes of ownership of assets on or after 20 September 1985. However, if you transfer an asset to your spouse as a result of the breakdown of your marriage or relationship, there is automatic rollover in certain cases. The rollover applies if your marriage or relationship ended on or after 20 September 1985, and: • you transfer an asset or a share of an asset to your spouse • you receive an asset or a share of an asset from your spouse, or • a company or trustee of a trust transfers an asset to you or your spouse. Section 126-15 of the ITAA 1997 deals with the roll over for a CGT event involving a company or a trustee and a spouse or former spouse. Subsection 126-15(1) of the ITAA 1997 states that the roll over consequences in section 126-5 of the ITAA 1997 apply if the 'trigger event' involves a company or a trustee and a spouse or former spouse of another individual and occurs because of: • a court order under the Family Law Act 1975 or under a state or territory law, or foreign law relating to breakdowns of relationships between spouses • a financial agreement that is binding under section 90G of the Family Law Act 1975 (known as a 'binding financial agreement') or a corresponding written agreement that is binding because of a corresponding foreign law • a financial agreement that is binding because of section 90UJ of the Family Law Act 1975 (known as a 'binding financial agreement') or a corresponding written agreement that is binding because of a corresponding foreign law. • an award made in an arbitration referred to in section 13H of the Family Law Act 1975 (known as an 'arbitral award') or a similar award under a corresponding state, territory or foreign law - such as an award made under the Western Australian Family Court Act 1997 , or • a written agreement that is binding because of a state, territory or foreign law relating to breakdown of relationship between spouses and that, because of such a law, a court is prevented from 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. Where the conditions for the relief are met, the relief applies automatically; it is not necessary for the taxpayer to elect for the relief to apply and it is not possible to elect that it not apply (Taxation Determination TD 1999/60). In your situation, where the assets are transferred to you from the trust as the result of a court order under the Family Law Act 1975 , or because of another reason specified in 126-15(1) of the ITAA 1997 the marriage rollover provisions will apply. For assets acquired by the transferor, in this case the trust, before 20 September 1985 you are taken to have acquired the asset before that date.