Private ruling: Capital gains tax
Date of advice: 14 August 2025
Published: 13 October 2025
Ruling period: For the income year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Does half of your one third ownership interest in your family holiday home that you lodged into the asset pool as part of the financial settlement with your former spouse form part of your fifth element cost base expenditure pursuant to subsection 110-25(6) of the Income Tax Assessment Act 1997 (ITAA 1997 )? | A1: No.

Relevant facts and circumstances: On DDMMYYYY you were involved in a court order made by consent under the Family Law Act 1975 relating to the breakdown of the relationship with your former spouse. You and two other individuals owned a family holiday home as joint tenants located at X (the property). The financial settlement agreement you filed with the Federal Magistrates Court of Australia (relating to court order No: (X) and dated DDMMYYYY, included the estimated value of your X ownership interest in the property as part of the total asset pool for the distribution between you and your former spouse. Your former spouse initially rejected the estimate you provided, so you obtained a market valuation for the property. The report dated DDMMYYYY and prepared by X was for $X with your X ownership interest being valued at $X. This market value of the property was accepted by the Family Court and your former spouse. The other individual owners of the property were reluctant to sell at that time. The final settlement therefore included a larger share of other assets you owned such as X. You sold other properties to fund the settlement as a cash payout to your former spouse was required.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 110 | Income Tax Assessment Act 1997 subsection 110-25(6)

Reasons for decision: Summary: Under Division 110 of the ITAA 1997 there are five elements which may be included in the cost base and reduced cost base of a capital gains tax (CGT) asset. The fifth element is capital expenditure incurred to establish, preserve or defend your title or right over a CGT asset (subsection 110-25(6) of the ITAA 1997). | Detailed Reasoning - Application to your circumstances: The market value of your one third ownership interest in the property was not expenditure incurred to establish the cost of the CGT asset (the property). Your former spouse did not make a specific claim to be entitled to an ownership interest in this property because a cash payout was required based on your net wealth available for distribution. The amount was not incurred to resolve a legal dispute with a person claiming an ownership interest in the CGT asset. Therefore this amount was not incurred in respect preserving or defending your legal title or right over the asset. The expenditure also does not form any part of the first four elements of the cost base. Accordingly, the amount does not form part of your fifth element cost base or reduced cost base of the property under Division 110 of the ITAA 1997.