Private ruling: Rollover
Ruling period: 1 July 2010 to 1 July 2012

Ruling: Question and Answer | Are you entitled to a marriage breakdown rollover? | No.

Relevant facts and circumstances: Prior to 20 September 1985 The Company purchased a property. On xx xx xx you separated from your spouse. On xx xx xx you entered into a deed of settlement with your spouse. Under the deed you were required to subdivide the land, build a house on the property and transfer the title to your spouse. The subdivision of the property was refused. Under paragraph 3(f) of the first Deed of Settlement it states; That in the event that either the said subdivision is refused or it is approved on conditions which are reasonably rejected by either the Wife or the Company or this Deed is found to be inoperative or null and void so far as provision for the said subdivisions is concerned the parties shall at the request of either the Husband or the Wife join in sale of the said property on terms as shall be agreed between them or failing agreement as shall be determined by arbitration….. In xx you spouse remarried and moved from the property. In xx, within days of your spouse moving, you moved into the property. You agreed to take over the loan your spouse obtained to build the house and they agreed that you would retain the whole of the property. On xx xx xx your spouse commenced further proceedings under Section 79 of the Family Law Act 1975 and you, your company and your spouse entered a new settlement. Under a paragraph of the second Deed of Settlement it states; The company will pay to the spouse the sum of $xx xx xx….. At no time during the Deed of Settlements did you transfer the title of the subdivided property to your spouse.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20 | Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Subdivision 126-A | Income Tax Assessment Act 1997 Section 126-5 | Income Tax Assessment Act 1997 Subsection 126-5(1) | Income Tax Assessment Act 1997 Subsection 126-5(2) | Income Tax Assessment Act 1997 Subsection 126-5(3) Reason for Decision | Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you make a capital gain or capital loss as a result of a Capital Gains Tax (CGT) event. The most common event is CGT event A1 which happens when a person disposes of a CGT asset to someone else. You are deemed to have disposed of a CGT asset if a change in ownership occurs from you to another entity (section 104-10 of the ITAA 1997). | As a general rule, CGT applies to all changes of ownership of assets acquired on or after 20 September 1985. However, marriage breakdown roll-over relief under Subdivision 126-A of the ITAA 1997 is potentially available when CGT event A1 happens involving asset transfers between spouses or former spouses. | The rollover will allow the transferor spouse to disregard a capital gain or capital loss that would otherwise arise as a result of the disposal of their interest in the asset. In effect, the spouse who receives the asset will make the capital gain or capital loss when they subsequently dispose of the asset. | Under section 126-5(2) of the ITAA 1997 only the following CGT events are eligible for a marriage breakdown roll-over; | · CGT events A1 and B1; and | · CGT events D1, D2, D3 and F1 | Under section 126-5(3) of the ITAA 1997 there is not roll-over if; | · the CGT asset involved is trading stock of the transferor, or | · for CGT event B1 - title in the CGT asset does not pass to the transferee at or before the end of the agreement. | Under the first Deed of Settlement you agreed to apply for the subdivision of the property, build a house on the subdivided part of the land designated to your spouse and transfer the title of that land to your spouse. | Although you built a house for your spouse and you applied to subdivide the property, which was refused, no change of title occurred. | Under a paragraph of the first Deed of Settlement it states; | That in the event that either the said subdivision is refused or it is approved on conditions which are reasonably rejected by either the spouse or the Company or this Deed is found to be inoperative or null and void so far as provision for the said subdivisions is concerned the parties shall at the request of either the Husband or the Wife join in sale of the said property on terms as shall be agreed between them or failing agreement as shall be determined by arbitration….. | This did not occur and on xx xx xx you entered into a second Deed of Settlement with your spouse. | Under paragraph 4 of the second Deed of Settlement it states; | The company will pay to the spouse the sum of $xx xx xx….. | At no time during the Deed of Settlements did you transfer the title of the subdivided property to your spouse. Therefore, as per section 126-5(3)(b) of the ITAA 1997, you are not entitled to a marriage breakdown roll-over.

Reasons for decision: Summary: Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you make a capital gain or capital loss as a result of a Capital Gains Tax (CGT) event. The most common event is CGT event A1 which happens when a person disposes of a CGT asset to someone else. You are deemed to have disposed of a CGT asset if a change in ownership occurs from you to another entity (section 104-10 of the ITAA 1997). As a general rule, CGT applies to all changes of ownership of assets acquired on or after 20 September 1985. However, marriage breakdown roll-over relief under Subdivision 126-A of the ITAA 1997 is potentially available when CGT event A1 happens involving asset transfers between spouses or former spouses. The rollover will allow the transferor spouse to disregard a capital gain or capital loss that would otherwise arise as a result of the disposal of their interest in the asset. In effect, the spouse who receives the asset will make the capital gain or capital loss when they subsequently dispose of the asset. Under section 126-5(2) of the ITAA 1997 only the following CGT events are eligible for a marriage breakdown roll-over; · CGT events A1 and B1; and · CGT events D1, D2, D3 and F1 Under section 126-5(3) of the ITAA 1997 there is not roll-over if; · the CGT asset involved is trading stock of the transferor, or · for CGT event B1 - title in the CGT asset does not pass to the transferee at or before the end of the agreement. Under the first Deed of Settlement you agreed to apply for the subdivision of the property, build a house on the subdivided part of the land designated to your spouse and transfer the title of that land to your spouse. Although you built a house for your spouse and you applied to subdivide the property, which was refused, no change of title occurred. Under a paragraph of the first Deed of Settlement it states; That in the event that either the said subdivision is refused or it is approved on conditions which are reasonably rejected by either the spouse or the Company or this Deed is found to be inoperative or null and void so far as provision for the said subdivisions is concerned the parties shall at the request of either the Husband or the Wife join in sale of the said property on terms as shall be agreed between them or failing agreement as shall be determined by arbitration….. This did not occur and on xx xx xx you entered into a second Deed of Settlement with your spouse. Under paragraph 4 of the second Deed of Settlement it states; The company will pay to the spouse the sum of $xx xx xx….. At no time during the Deed of Settlements did you transfer the title of the subdivided property to your spouse. Therefore, as per section 126-5(3)(b) of the ITAA 1997, you are not entitled to a marriage breakdown roll-over.

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