Private ruling: CGT - marriage breakdown rollover
Date of advice: 25 September 2025
Published: 17 November 2025
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the rollover under section 126-5 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the transfer of the Property from you to your ex-spouse? | A1: No.

Relevant facts and circumstances: You acquired a property (The Property) in your sole name. The Property was used as a rental property. You and your spouse separated (ex-Spouse). You agreed that as part of the property settlement following the separation, that the Property would be transferred to your ex-Spouse. The agreement was informal. On XX July 20XX you signed the contract for the Property to be transferred to your ex-Spouse. There was no court order, consent order or binding financial agreement in place at the time of transfer of the Property from you to your ex-Spouse. You will formalise your property settlement through a Binding Financial Agreement (BFA) under the Family Law Act 1975 during the ruling period.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 126-5

Reasons for decision: Summary: You transferred ownership of the Property to your ex-Spouse under a private or informal agreement, therefore the conditions for the marriage relationship breakdown rollover to apply have not been met. | Detailed Reasoning - Detailed reasoning: As a general rule, capital gains tax (CGT) applies to all changes of ownership of assets on or after 20 September 1985. You make a capital gain or capital loss if CGT event happens. The most common event occurs if you dispose of a CGT asset, such as your home or shares. This is called CGT event A1. You dispose of a CGT asset if a change in ownership occurs from you to another entity. The time of the event is when the disposal contract is entered into, or if there is no contract, when the actual change of ownership occurs. 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 roll-over allows the transferor spouse to disregard a capital gain or capital loss that would otherwise arise. Subsection 126-5(1) provides that there is a roll-over if a CGT event happens involving an individual and his or her spouse or former spouse because of: (a) a court order under the Family Law Act 1975 (FLA) or under a state law, territory law or foreign law relating to breakdowns of relationships between spouses (b) a maintenance agreement approved by a court under FLA section 87 or a corresponding agreement approved by a court under a corresponding foreign law (c) before the 2009/10 income year, a court order under a state law, territory law or foreign law relating to de facto marriage breakdowns (d) something done under a binding financial agreement made under FLA Part VIIIA or a corresponding foreign law (e) something done under an award made in an arbitration under FLA section 13H or a corresponding state law, territory law or foreign law, or (f) something done under a written agreement that is binding because of a state, territory or foreign law relating to breakdowns of relationships between spouses and that prevents a court 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. Taxation Determination TD1999/53 Income tax: capital gains: if a CGT asset is transferred by agreement between spouses and a court order later sanctions its transfer, was the transfer of assets made 'because of' the court order in terms of section 126-5 or 126-15 for roll-over to apply? states that a CGT asset transferred between spouses by agreement, before a court order is made under the Family Law Act 1975 or a State, Territory or foreign law relating to de facto marriage breakdowns, is not transferred 'because of' the court order. A CGT event only happens 'because of' a court order if the CGT event is caused by the court order. So, if a person and their spouse divide assets under a private or informal agreement (not because of a court order, a binding financial agreement, an arbitral award or another agreement or award), the marriage breakdown roll-over does not apply. This is because the court order or binding financial agreement does not cause the CGT event (transfer) to happen. | Detailed Reasoning - Application to your situation: In your case, you and ex-Spouse are separated and there is no reasonable likelihood of reconciliation. CGT event A1 occurred when you transferred the Property to your ex-Spouse under an informal arrangement. However, as the transfer of the Property to your ex-Spouse happened by mutual agreement before a BFA is entered into, the transfer was not caused by the BFA and marriage breakdown relief under section 126-5 of the ITAA 1997 does not apply.