Private ruling: Marriage breakdown rollover
Published: December 2014
Ruling period: Income year ended 30 June 2014
Date scheme commenced: August 2013

Ruling: Q1: Will you be responsible for the entire capital gain or loss on the disposal of the property? | A1: Yes

Relevant facts and circumstances: In X you purchased a property with your spouse. On X you moved into the property and it became your main residence. The property had previously been a rental investment property. On X your spouse moved out of the property. On X a Family Court Order was made by consent. It provided that you must do all acts and things and your spouse must execute all documents, instruments and writing necessary to transfer to you, your spouse's right to title and interest in the property. You contracted to sell the property to a third party. You believe your spouse was tardy in supplying the signed and witness transfer documents which resulted in a specific clause in the subsequent sale contract and ultimately the transfer taking place 10 days after settlement. Settlement of the property to a third party occurred on X. The transfer of your spouse's interest in the property to you occurred on X. The transfer from you to the third party also occurred on X.

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 126-5

Reasons for decision: Summary: Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you make a capital gain or capital loss if, and only if, a capital gains tax (CGT) event happens to a CGT asset. Section 104-10 of the ITAA 1997 describes the most common CGT event, being CGT event A1. It provides that CGT event A1 happens if you dispose of a CGT asset. Subsection 104-10(2) defines a disposal as: You dispose of a *CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner. Subsection 104-10 (3) of the ITAA 1997 provides that the time of the event is when you enter into the contract for the disposal, or if there is not contract when the change of ownership occurs. The note to this subsection provides that if a contract falls through before completion, this event does not happen because no change in ownership occurs. In you circumstances, your spouse was not a party to the contract and therefore you could not effectively transfer title in the property under the contract until you had title. Consequently we consider the CGT event to have occurred when ownership changed on the X after your spouse transferred her share in the title to you. As this transfer from your spouse to you was due to Family Court order the marriage breakdown rollover will apply under subdivision 126-A of the ITAA 1997.