ATO Interpretative Decision
ATO ID 2001/693 (Withdrawn)
Income Tax
Capital Gains Tax : Marriage Breakdown - Annual payments to former spouseFOI status: may be released
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This ATOID is a simple restatement of the law and does not contain an interpretative decision.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the taxpayer entitled to a deduction under either section 8-1 or section 12-5 of the Income Tax Assessment Act 1997 (ITAA 1997) or a capital loss under Division 104 of the ITAA 1997 for an annual payment to a former spouse made under a court order upon the dissolution of a marriage?
Decision
No. The taxpayer is not entitled to a deduction under either section 8-1 or 12-5 of the ITAA 1997 or to a capital loss under Division 104 of the ITAA 1997 for the amount of the annual payment.
Facts
The taxpayer was granted a divorce subject to provisions of the Minutes of a Court Order. The taxpayer is required to pay the former spouse a sum of money by annual instalments.
The instalments will be funded from the income of the taxpayer's business.
Reasons for Decision
Paragraph 8-1(a) of the ITAA 1997 provides that the amount of any loss or outgoing can be deducted from assessable income provided that:
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- it is incurred in gaining or producing assessable income; or
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- it is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income.
Subsection 8-1(2) of the ITAA 1997 however does not allow a loss or outgoing to the extent that it is of capital, or of a capital nature or of a private or domestic nature.
The taxpayer incurred the expenditure neither in gaining or producing assessable income nor in carrying on a business. The payment is of a private or domestic nature.
Section 12-5 of the ITAA 1997 does not contain any specific provision that allows a deduction for an amount paid in these circumstances.
Division 104 of the ITAA 1997 contains all the CGT events that can give rise to a capital gain or loss. The facts mentioned do not lead to the operation of any of these CGT events and there is no capital loss available in these circumstances.
Date of decision: 21 September 2001Year of income: Year ending 30 June 2002
Legislative References:
Income Tax Assessment Act 1997
Section 8-1
Paragraph 8-1(a)
Paragraph 8-1(2)(a)
Paragraph 8-1(2)(b)
Section 8-5
Section 12-5
Division 104
Keywords
Capital gains tax
Capital losses
CGT events
Deductions & expenses
Family law
Family settlements & arrangements
Marriage breakdown
Ordinary course of business
ISSN: 1445-2782
| Date: | Version: | |
| 21 September 2001 | Original statement | |
| You are here | 5 April 2007 | Archived |