Private ruling: Capital gains tax
Date of advice: 29 September 2017
Published: February 2018
Ruling period: Financial year ending 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Is roll-over relief under section 126-5 of the Income Tax Assessment Act 1997 (ITAA 1997) available to you in relation to your share of a property that was to be transferred to your ex-spouse under a family court order where the transfer did not occur? | A1: No

Relevant facts and circumstances: A marriage breakdown occurred. A consent order was made under the Family Law Act 1975 in the 2017 financial year. The order provided that you would transfer to your former spouse your interest in a property with the intent that your former spouse becomes the sole registered proprietor. The transfer of the property did not occur and the legal title remained in both names. The property was sold in the 2017 financial year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 126-A | Income Tax Assessment Act 1997 Section 126-5

Reasons for decision: Summary: A same asset roll-over involves the transferral of an asset from one taxpayer to another. It allows a taxpayer to defer the making of a capital gain from such a CGT event until such time as a later event occurs in respect of the asset. Subdivision 126-A of the ITAA 1997 considers same asset roll-overs in the context of marriage breakdown. Section 126-5 of the ITAA 1997 states there is a roll-over if a CGT event (the trigger event) happens involving an individual (the transferor) and his or her spouse (the transferee), or a former spouse (also the transferee) because of: (a) a court order under the Family Law Act 1975 or under a State law, Territory law or foreign law relating to breakdowns of relationships between spouses; or (b) a maintenance agreement approved by a court under section 87 of the Family Law Act 1975 or a corresponding agreement approved by a court under a corresponding foreign law; or (c) (Repealed by No 144 of 2008) (d) something done under: i. a financial agreement made under Part VIIIA of the Family Law Act 1975 that is binding because of section 90G of that Act; or ii. a corresponding written agreement that is binding because of a corresponding foreign law; or (da) something done under: i. a Part VIIIAB financial agreement (within the meaning of the Family Law Act 1975 ) that is binding because of section 90UJ of that Act; or ii. a corresponding written agreement that is binding because of a corresponding foreign law; or (e) something done under: i. an award made in an arbitration referred to in section 13H of the Family Law Act 1975 ; or ii. a corresponding award made in an arbitration under a corresponding State law, Territory law or foreign law; or (f) something done under a written agreement: i. that is binding because of a State law, Territory law or foreign law relating to breakdowns of relationships between spouses; and ii. that, because of such a law, 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. Subsection 126-5(4) of the ITAA 1997 states that a capital gain or a capital loss the transferor makes from the CGT event is disregarded. In your case, the property was not transferred and there was no CGT trigger event because of the consent order under the Family Law Act 1975. The property remained in both you and your former spouse’s names until the property was ultimately disposed of by sale to a third party. Accordingly, the roll-over provisions in Subdivision 126-A of the ITAA 1997 will not be available to you and any capital gain made by you upon the sale of the property will not be disregarded under subsection 126-5(4) of the ITAA 1997.