Private ruling: Property settlement
Date of advice: 30 November 2017
Published: April 2018
Ruling period: Year ended 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Is the payment received from your former spouse assessable income? | A1: No. | Q2: Will you have a CGT event when you resign as trustee in the Trust? | A2: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5. | Income Tax Assessment Act 1997 section 102-20

Reasons for decision: Summary: Assessable income Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes income according to ordinary concepts (ordinary income) derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Ordinary income has generally been held to include three categories, namely, income from rendering personal services, income from property and income from carrying on a business. Based on case law, it can be said that ordinary income generally includes receipts that are earned, expected, are relied upon, and have an element of periodicity, recurrence or regularity. Whether or not a particular receipt is ordinary income depends on its character in the hands of the recipient. Regard must be given to the full circumstances in which the payment is received. In your case, the payment to be received under a Family Law Act 1975 court order is not paid for the amount of your time or to reward you for personal services provided. The payment is to settle matters following your marriage separation. Although the payment can be said to be expected, and relied upon, this expectation does not arise from personal services performed. The payment relates to your personal family matters and is regarded as private in nature. Therefore, the payment is not assessable as ordinary income under section 6-5 of the ITAA 1997. Section 6-10 of the ITAA 1997 refers to assessable amounts that are not ordinary income. These amounts are called statutory income. A list of the statutory income provisions can be found in section 10-5. None of the provisions listed are relevant in relation to the payment. As the payment is neither ordinary nor statutory income, it is not assessable income. Capital gains tax provisions Section 102-20 of the ITAA 1997 states that a capital gain or capital loss is made only if a capital gains tax (CGT) event happens to a CGT asset. In your case, you are not disposing of a CGT asset. You are resigning as trustee of the Trust. The payment is not regarded as a capital payment for your trust interest. No other CGT event is relevant in your circumstances. Therefore no amount is assessable under the CGT provisions.

Relevant facts: You and your estranged spouse have reached an agreement regarding the distribution of your property pool. | One of the assets of the property pool consists of the former matrimonial home. | You and your estranged spouse owned the property as Trustee. | The Trust Deed shows your former spouse as the primary beneficiary. Any spouse of the primary beneficiary is also a primary beneficiary. | In your capacity as Trustee of the Trust, you are to transfer your interest in the Trust to your former spouse, and/or their nominee, as Trustee of the Trust. | Under the agreement you will transfer all your right title and interest in the Trust and resign from any office held by you with respect to the Trust. | The only asset of the Trust is the property. | The property will remain a Trust asset after you resign as trustee. | Under the agreement you will receive a cash payment from your former spouse as part of the property settlement after taking into account all the assets, liabilities and financial resources of the marriage. The agreement is part of the proceedings in the federal Circuit court of Australia pursuant to the Family Law Act 1975 .