A CGT rollover may apply if an interest in a small superannuation fund is subject to a payment split on the breakdown of relationship between spouses and a CGT asset of a small superannuation fund is transferred to another complying superannuation fund.
A small superannuation fund is one that is a complying fund and has fewer than five members.
Transfer of own interest in a small superannuation fund
A trustee of a small superannuation fund also qualifies for CGT rollover when the trustee transfers an asset or assets reflecting the entire personal interest of one of the spouses or former spouses to the trustee of another complying superannuation fund for the benefit of that spouse. For the rollover to apply both spouses must hold an interest in the small superannuation fund before the transfer. This allows spouses to separate their superannuation arrangements on the breakdown of their relationship without any CGT liability.
To qualify for a rollover, the spouses have to be permanently separated at the time of the transfer, the transfer has to have happened because of reasons directly connected with the breakdown of the relationship between spouses and, the transfer has to have been made in accordance with:
- a court order made under section 79 or subsection 90AE(2) or 90AF(2) or section 90SM of the Family Law Act 1975 or a corresponding foreign law
- a court order made under a state, territory or foreign law relating to breakdowns of relationship between spouses that corresponds to an order made under the Family Law Act 1975
- an award made in an arbitration referred to in section 13H of the Family Law Act 1975 (known as an arbitral award) or a corresponding award made in an arbitration under a corresponding state, territory or foreign law
- a financial agreement that is binding under section 90UJ of the Family Law Act 1975 (known as a ‘binding financial agreement’) and was made on or after 1 March 2009
- a financial agreement that is binding under section 90G of the Family Law Act 1975 (known as a ‘binding financial agreement’) or a corresponding written agreement that is binding because of a corresponding foreign law
- a written agreement that is binding because of a state, territory or foreign law relating to breakdowns of relationship between spouses and, that because of such a law, a court is prevented from making an order about matters to which the agreement applies, or that is inconsistent with the terms of the agreement for those matters, unless the agreement is varied or set aside.
Once the trustee has obtained a CGT rollover for such a transfer, the rollover is no longer available for a transfer of any asset reflecting the personal superannuation interest of the other spouse if that later transfer arises out of the same marriage or relationship breakdown.
Example 99: Transfer of superannuation interest
Danny and Claudia each have a personal interest in a small superannuation fund. They reach a binding financial agreement on marriage breakdown which provides that the trustee transfer all of the assets reflecting Danny’s personal interest to another complying superannuation fund. The assets reflecting Danny’s personal interest consist of a parcel of shares and a rental property.
A CGT rollover will apply to the transfer. Consequently, no rollover will then be available to the trustee for any transfer for the benefit of Claudia.End of example
The consequences of the rollover for the transfer of a superannuation interest are the same as for the transfer of other assets between spouses as a result of a marriage or relationship breakdown.
Changes to the law ensure that no CGT liability arises in relation to the ending of spouses’ rights that directly relate to the breakdown of their marriage or relationship, including if they receive cash as part of a breakdown settlement. No CGT liability arises if, at the time the rights end, the spouses were separated and there was no reasonable likelihood of cohabitation being resumed.