Private ruling: CGT - relationship breakdown rollover
Date of advice: 7 October 2025
Published: 24 November 2025
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Did capital gains tax event A1 happen to your interest in the Property due to the Agreement? | A1: Yes. | Q2: Will the capital gain you made on the disposal of your interest in the Property be disregarded under section 126-5 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A2: Yes. | Q3: Did capital gains tax event A1 happen to you when the Property was sold? | A3: No.

Relevant facts and circumstances: You were in a de facto relationship with Person A. During your relationship you and Person A had lived at Property X, which you solely owned. You and Person A purchased a property as joint tenants (the Property) that was used for rental purposes after it was purchased until it was sold. You and Person A separated. On XX XXX 20XX you and Person A signed a Financial Agreement under the Family Law Act 1975 (the Agreement) which included the following information: • You and Person A had separated, with the relationship having broken down irretrievably. You and Perso A had lived separately since the date of your separation, and it is your joint opinion that there was no likelihood of co-habitation being resumed. • The Agreement had been entered into to arrange your property affairs in relation to the division of property to avoid litigation, which included Property X and the Property. • The Agreement provided that you would transfer to Person A your right and interest in the Property, at Person A's expense. • Contemporaneously with the transfer of your interest in the Property to Person A, you and Person A would do all acts and things and sign all necessary documents to discharge the Mortgage on the Property (the Mortgage) to replace it with a Mortgage in Person A's name only with Person A assuming all liability for all payments for the Mortgage debt. Person A would also pay all apportionable rates, taxes and outgoings in relation to the Property. • If Person A was unable to discharge the Mortgage and replace it with a Mortgage solely in their name, you and Person A would take all necessary steps and execute all necessary documents to cause the Property to be sold by private treaty at the earliest possible date at a price agreed upon between you and Person A. Failing such an agreement, the price would be determined by an independent valuer, with the costs to be borne equally by you and Person A. • If the Property was not sold by a specified date, then you and Person A would do all acts and things and sign all documents necessary to list the Property for sale by public auction. • The proceeds from the sale of the Property would be distributed as follows: • In payment of the costs of sale, including real estate agent's fees and any auctioneer's fees • Repayment of the Mortgage to lending institution • Payment of any rate adjustments as at the date of the settlement of the sale; and • The net balance of the sale proceeds to be paid to Person A. • Taxes - the parties agree that they will sign all documents and do all things including the making of consent orders to ensure that the burden of any stamp duty or taxes is minimised and roll over relief when applicable obtained. • Copies of statements made under subsection 90UJ(1) of the Family Law Act 1975 signed by you and Person A's and your respective legal representatives; and • A copy of a separation declaration pursuant to section 90UF of the Family Law Act 1975 signed by you in which you have declared that you and Person A had been in a de facto relationship, that you were separated and living apart and that in your opinion there was no reasonable likelihood of cohabitation being resumed. Following the signing of the Agreement by you and Person A: • The rental income received from the Property was allotted to Person A who used it to pay the Mortgage. • Person A had solely paid the Mortgage after the tenants moved out of the Property. • After the tenants had moved out the Property it had remained vacant. • Person A paid for expenses arising in relation to the Property from rental income and their own funds except for an amount you had contributed towards the installation of new air conditioners at the Property, with the funds being deposited into a joint bank account held with Person A so that they could access the funds; and • While you were informed, the daily decisions in relation to the Property were made by Person A who dealt with the real estate agent managing the property Upon the breakdown of your relationship, it was agreed to by you, Person A, and your respective solicitors for you to receive the equity back in Property X, with Person A to receive a lump sum payment and the Property. Person A was not able to obtain finance to obtain a sole Mortgage over the Property in accordance with the Agreement and take over the Mortgage, and it was decided to sell the Property. Person A dealt with the real estate agent in relation to the sale of the Property, other than you co-signing relevant documents, such as in relation to advertising or sale documents, or when Person A could not be contacted due to them travelling on one occasion. The Property was sold. By mutual agreement between you and Person A, and on instructions from your solicitor, you could not take any financial benefit from the sale of the Property. Person A received the net sale proceeds from the sale of the Property after expenses were paid.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | 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 Subdivision 104-B | Income Tax Assessment Act 1997 subdivision 126-A | Income Tax Assessment Act 1997 section 126-5

Reasons for decision: Detailed Reasoning - Question 1: Did capital gains tax (CGT) event A1 happen to your interest in the Property due to the Financial Agreement?: For CGT purposes, section 102-20 of the ITAA 1997 states that a capital gain or capital loss is made only if a CGT event happens to a CGT asset. A property, or an interest in a property, is a CGT asset under section 108-5 of the ITAA 1997. Section 108-7 of the ITAA 1997 provides that individuals who own a CGT asset as joint tenants are treated as if they each owned a separate CGT asset constituted by an equal interest in the asset and as if each of them held that interest as a tenant in common. Under section 104-10 of the ITAA 1997, CGT event A1 happens if you dispose of a CGT asset. Subsection 104-10(2) states that you dispose of a CGT asset if a change of ownership occurs from you to another entity. An individual can be a legal owner but have no beneficial ownership in an asset. It is the beneficial owner that will have a CGT event upon sale of a CGT asset. In some cases, an entity may hold a legal ownership interest in property for another individual in trust. | Detailed Reasoning - Application to your situation: You and Person A purchased the Property as joint tenants. As a result of your separation, you and Person A entered into the Agreement that stipulated that your interest in the Property was to be transferred to Person A subject to them obtaining the necessary finance to take over the Mortgage. However, if they could not obtain the finance, then the Property was to be sold, with the sale proceeds to be used to pay specified costs, with the remainder of the sales proceeds to be paid to Person A. The terms provided in the Agreement make it clear that from the date you and Person A had signed the document that you no longer held a beneficial interest in the Property. From that date onwards: • you had merely held the legal ownership of the property on trust for Person A; and • Person A had a right to have the Property transferred to them, or alternatively they would receive the net proceeds from the sale of the Property. This constituted a disposal of your interest in the Property and a CGT event A1 occurred as a result of you and Person A entering into the Agreement. You made a capital gain or loss in relation to the CGT event A1 occurring unless there is any legislation that entitles you to disregard the capital gain or loss. Question 2: Will the capital gain you made on the disposal of your interest in the Property be disregarded under section 126-5 of the Income Tax Assessment Act 1997 (ITAA 1997)? Generally, CGT applies to all changes of ownership of assets acquired on or after 20 September 1985. However, under section 126-5 of the ITAA 1997, if you transfer an asset to your spouse as a result of the breakdown of your marriage or relationship, there is automatic rollover when the following conditions have been met: • The CGT event must have occurred in relation to a qualifying agreement, such as a court order, binding financial agreements under the Family Law Act 1975, or a written binding agreement. From 1 March 2009, the rollover applies to binding financial agreements made between parties in a de facto relationship under section 90UJ of the Family Law Act 1975 ; and • The following additional conditions when the transfer happens because of a binding financial agreement: • The spouses involved were separated • There is no reasonable likelihood of cohabitation being resumed; and • The transfer happened because of reasons directly connected with the breakdown of the marriage or relationship. When eligible for the rollover, any capital gain or capital loss that would otherwise arise for the spouse transferring the interest is disregarded. | Detailed Reasoning - Application to your situation: Having considered your circumstances and the relevant factors relating to your situation, you meet the conditions for the relationship breakdown rollover to apply in relation to the disposal of your interest in the Property because: • your relationship ended on or after 20 September 1985 with no likelihood of cohabitation being resumed • your ownership interest in the Property was transferred to Person A; and • the CGT event happened because of a binding financial agreement made under the Family Law Act 1975 . Therefore, you will be eligible for the relationship breakdown rollover under section 126-5 of the ITAA 1997. Accordingly, you can disregard any capital gain or loss made are a result of transferring your interest in the Property to Person A. Note: To record that the rollover has been applied in relation to the disposal of your interest in the Property you will need to report the rollover in your income tax return at the capital gains tax question as follows: • Select 'Yes' at ' Have you applied an exemption, rollover or additional discount? ' • Select 'S: Same asset roll-overs' at Capital gains tax exemption, rollover or additional discount type code. | Detailed Reasoning - Question 3: Did CGT event A1 happen to you when the Property was sold?: As outlined above, CGT event A1 occurs if you dispose of an asset, or an interest in an asset, to another entity. However, a change of ownership does not occur if you stop being the legal owner but continue to be the beneficial owner under subsection 104-10(2) of the ITAA 1997. An individual can be a legal owner of a CGT asset but have no beneficial ownership in an asset. It is the beneficial owner that will have a CGT event upon sale of a CGT asset. | Detailed Reasoning - Application to your situation: For CGT purposes you were no longer the owner of the Property when it was sold, and it was not you disposing of the Property. Therefore, no CGT event A1 occurred to you when the Property was sold..