Private ruling: Capital gains tax
Date of advice: 23 August 2016
Published: September 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to disregard any capital gain or loss that results from the disposal of your residence? | A1: Yes.

Relevant facts and circumstances: You purchased a property with your ex-spouse prior to 20 September 1985. Following a marriage breakdown your ex-spouse transferred their share to you. The property was transferred solely to you as a result of a court order made under the Family Law Act 1975. You entered into a contract to sell the property.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20 | Income Tax Assessment Act 1997 Subsection 104-10(5) | Income Tax Assessment Act 1997 Subsection 126-5(1) | Income Tax Assessment Act 1997 Subsection 126-5(6)

Reasons for decision: Summary: Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you make a capital gain or loss as a result of a capital gains tax (CGT) event happening to a CGT asset. Under subsection 104-10(5) of the ITAA 1997, generally you are entitled to disregard any capital gain or capital loss you make on the disposal of an asset that you acquired before 20 September 1985. Marriage breakdown rollover Where an asset is transferred to a spouse as a result of a marriage breakdown, there is an automatic rollover for the transferring spouse if certain conditions are met. Subsection 126-5(1) of the ITAA 1997 states that the roll-over conditions are met if a CGT event occurs because of a court order under the Family Law Act 1975 . Under subsection 126-5(6) of the ITAA 1997 if a CGT asset was acquired by the transferor spouse prior to 20 September 1985, the transferee spouse is also taken to have acquired the asset prior to that date. Your ex-spouse's interest in the property was transferred to you after a marriage breakdown as a result of a court order under the Family Law Act 1975 . Therefore, the transfer of the interest qualifies for the marriage breakdown rollover under subsection 126-5(1) of the ITAA 1997. As your former spouse acquired their share of the property prior to 20 September 1985, you are also taken to have acquired their interest in the property prior to this date. Accordingly, under section 104-10(5) of the ITAA 1997 any capital gain or loss that results from the disposal of your property is disregarded.