Private ruling: CGT - breakdown rollover
Date of advice: 6 November 2024
Published: 16 December 2024
Ruling period: Year ended 30 June 20XX
Date scheme commenced: XX October 20XX

Ruling: Q1: Will the capital gain you made on the disposal of your interests in the Properties be disregarded under section 126-5 of the Income Tax Assessment Act 1997 ? | A1: No.

Relevant facts and circumstances: You owned an interest in a property (Property A) along with your siblings, Sibling A and Sibling B. You also owned an interest in a property (Property B) along with Sibling A. You and your siblings engaged in mediation due to a dispute about the ownership of the properties. On XX October 20XX, you entered into a Heads of Agreement (The Agreement) with Sibling A, Sibling B, Sibling C and Sibling C's spouse. On XX February 20XX as a result of The Agreement: • your interest in Property A was transferred to Sibling A, and • 49% of your interest in Property B was transferred to Sibling C and their spouse.

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

Reasons for decision: Detailed Reasoning - Marriage breakdown rollover relief: As a general rule, capital gains tax (CGT) applies to all changes of ownership of assets acquired on or after 20 September 1985. However, under section 126-5 of the Income Tax Assessment Act 1997 (ITAA 1997), 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 rollover applies if your marriage or relationship ended on or after 20 September 1985, and: • you transfer an asset or a share of an asset to your spouse • you receive an asset or a share of an asset from your spouse, or • a company or trustee of a trust transfers an asset to you or your spouse. The spouse of an individual includes: • another individual (whether of the same sex or a different sex) with whom the individual is in a relationship that is registered under a State law or Territory law prescribed for the purposes of section 2E of the Acts Interpretation Act 1901 as a kind of relationship prescribed for the purposes of that section and • another individual who, although not legally married to the individual, lives with the individual on a genuine domestic basis in a relationship as a couple. | Detailed Reasoning - Your situation: You are not transferring an asset to your spouse as a result of a breakdown of your marriage or relationship. You are transferring assets to your siblings. Therefore, the rollover provision under subdivision 126-A of the ITAA 1997 will not apply and you are not entitled to an automatic rollover of CGT on the disposal of your interest in the Properties. The capital gain you made on the disposal of your interests in the Properties cannot be disregarded under section 126-5 of the ITAA 1997. Note: You may be entitled to a partial main residence exemption on the disposal of your interest in Property B.