Extending the marriage breakdown capital gains tax roll-over relief and related amendments
Warning: This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.
The Australian Government announced the following changes in the 2005-06 Budget. The changes were introduced to Parliament on 22 June 2006. The changes are intended to extend the scope of the marriage breakdown capital gains tax (CGT) rollover relief received Royal Assent on 12 December 2006.
The amendments extend the rollover to assets transferred to a spouse or former spouse because of:
a binding financial agreement under the Family Law Act 1975 or a similar agreement under a corresponding foreign law
an arbitral award under the Family Law Act or a corresponding award made under a corresponding state law, territory law or foreign law, and
a written agreement under state law, territory law or foreign law relating to de facto marriage breakdowns and which cannot be overridden by an order of a court (except to avoid injustice).
For transfers that happen because of one of these agreements or awards, rollover only applies if the CGT event happens after 12 December 2006.
Binding financial agreements entered into under the Family Law Act allow legally married spouses to settle property issues before, during or after the marriage, and can cover some or all of the marital property. Arbitral awards entered into under the Family Law Act allow legally married spouses to settle marital property issues using arbitration.
The changes have been made to reduce the need for involvement of the courts in marriage breakdown settlements.
Two related amendments have also been made.
The first related amendment ensures that the CGT main residence exemption interacts more appropriately with the marriage breakdown rollover relief. It applies where:
the transferor spouse acquired the dwelling (or relevant interest in the dwelling) on or after 20 September 1985
marriage breakdown rollover is available to the transferor spouse, and,
the CGT event happens after 12 December 2006.
In this situation, the main residence rules take into account the way in which both the transferor and transferee spouses use the dwelling when determining the transferee spouse's eligibility for the main residence exemption.
The second related amendment ensures that marriage breakdown cash settlements do not give rise to CGT liabilities. The exemption applies to cash settlements made after 12 December 2006.
Legislation and supporting material
Legislation to bring this measure into effect was contained in the Tax Laws Amendment (2006 Measures No. 4) Act 2006 (168 of 2006). The associated Explanatory Memorandum is also available at http://law.ato.gov.au/atolaw/index.htm
Subscribe
