Private ruling: Capital gains tax
Date of advice: 23 June 2023
Published: 14 August 2023
Ruling period: Year ending 30 June 2023 | Year ending 30 June 2024
Date scheme commenced: 1 July 2022

Ruling: Q1: Will the marriage breakdown roll over in section 126-5 of the Income Tax Assessment Act 1997 apply when you transfer your share of the property to your spouse? | A1: Yes. | Q2: Will you be required to pay any Capital gains tax on the transfer of your share of the property to your spouse? | A2: No.

Relevant facts and circumstances: You and your spouse separated a number of years ago. You and your spouse have lived separately since this date. During the relationship you and your spouse purchased a property and lived in it as your main residence. This property was purchased in joint names. You and your spouse intend on entering into a binding financial agreement which complies with Section 90UD of the Family Law Act 1975CTH. You will transfer your interest in the property to your spouse. The agreement is currently with the court waiting stamping.

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

Reasons for decision: Summary: Section 126-5 of the Income Tax Assessment Act 1997 outlines that if an asset or an interest in an asset is transferred by a person to their spouse as a result of the breakdown of their marriage or relationship, a roll-over applies provided certain conditions are met. In order for the roll-over to apply, the CGT event must have happened because of: • 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 court order under a state, territory or foreign law relating to breakdown of relationship between spouses. • a financial agreement made under Part VIIIA of the Family Law Act 1975, • an award made in arbitration referred to in section 13H of the Family Law Act 1975 , or • something done under a written agreement that is binding because of a State law, Territory law or foreign law relating to breakdowns of relationships between spouses and 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. The binding financial agreement meets the requirements under the legislation for the roll over to apply when you transfer your interest in the property to your spouse. You will not be required to pay any Capital gains on this transfer.