Private ruling: capital gains tax (CGT) made on the disposal of the property
Published: December 2011
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Is any capital gains tax (CGT) made on the disposal of the property disregarded? | A1: No.

Relevant facts and circumstances: Your former spouse purchased property after 20 September 1985 The property has been used as an investment property for the whole period of your former spouse's ownership and has been negatively geared. You have separated from your former spouse. Pursuant to consent orders, entered into as a result of a Family Court settlement, your former spouse transferred title to the property to you. Pursuant to the consent orders, you have received all rent from the property from. The property has recently been valued by a licensed valuer. For the purposes of this private ruling you will sell the property and make a capital gain.

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 118-125 | Income Tax Assessment Act 1997 section 126- 5

Reasons for decision: Detailed Reasoning - Capital Gains Tax: A capital gain or a capital loss may arise if a capital gains tax event (CGT event) occurs to a capital asset. The disposal of the property, which is a CGT asset, causes a CGT event A1 to occur under the section 104-10 of Income Tax Assessment Act 1997 (ITAA 1997). You dispose of an asset when a change of ownership occurs from you to another person or entity. | Detailed Reasoning - Marriage breakdown roll-over: Where an asset is transferred to an individual's former spouse as a result of a marriage breakdown, there is an automatic roll-over in certain cases. The roll-over allows the transferor to disregard a capital gain or capital loss that would otherwise arise. The effect of this is that the party that receives the asset being the transferee will make a capital gain or loss when they dispose of the asset. In order for the marriage breakdown roll-over to apply, the CGT event must have occurred due to: · An order of a court or court order made by consent under the Family Law Act 1975 or a similar law of a foreign country; · A maintenance agreement approved by a court under section 87 of that Act or a similar agreement under a foreign law, or · A court order under a state, territory or foreign law relating to de facto marriage breakdowns. · Marriage breakdown roll-over provisions apply to events that occur after 12 December 2006 due to one of the following: · A financial agreement that is binding under section 90G of the Family Law Act 1975 (known as a binding financial agreement); · An award made in an arbitration referred to in section 13H of this Act (known as an arbitral award);or · A written agreement that is binding due to operation of a state or territory law relating to defacto marriage breakdowns and which cannot be overridden by an order of a court, except to avoid injustice. If an asset is transferred under a contract, such as a binding financial agreement, the CGT event happens when the contract is entered into. If there is no contract, the CGT event happens when the change of ownership of the asset occurs. Transfers made due to an order of a court or arbitral award are not made under a contract. Accordingly, no CGT event happens until the asset is transferred under the award or order. | Detailed Reasoning - Conclusion: You have received the property as a result of a court order and accordingly upon receiving the asset you are taken to have acquired it at the time of transfer for the cost base of your former spouse. In your situation, you will be taken to have acquired the asset when it was transferred to you and for your former spouse's cost base. As you acquired this property after 20 September 1985 and it was not your main residence for all of your ownership period the capital gain made is not disregarded.

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