ATO Interpretative Decision

ATO ID 2001/67

Income Tax

CGT: Rollover Relief (Disposal of Shares)
FOI status: may be released

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Issue

Whether Capital Gains Tax (CGT) rollover relief is available to a taxpayer under section 126-5 (Income Tax Assessment Act 1997 (ITAA 1997)) on disposal of shares that were to be transferred to the taxpayer's spouse as part of a marriage-breakdown property settlement.

Decision

No. The taxpayer is not entitled to section 126-5 (ITAA 1997) CGT rollover relief as the shares, in accordance with that provision, are not disposed of pursuant to an order of the court.

Facts

The taxpayer and the taxpayer's spouse are awaiting court endorsement of a marriage breakdown property settlement. On negotiating the settlement, they had agreed that jointly-owned shares would be transferred to the taxpayer's spouse. Subsequently, the shares were sold to preserve their value. Consistent with the agreement, the current settlement deed states that the proceeds from the sale of the shares and any interest earned on the account will pass to the taxpayer's spouse.

Reasons For Decision

Section 126-5 provides CGT rollover relief in certain instances, including, where a taxpayer disposes of an asset to their spouse pursuant to a court order. Where section 126-5 applies, the spouse is treated as acquiring the asset for its cost base (if the taxpayer acquired the asset on or after 20 September 1985) and the taxpayer disposing of the asset is not subject to CGT on the disposal of the asset.

In this case, section 126-5 cannot apply to provide rollover relief to the taxpayer as there is yet to be a court-ordered settlement. Furthermore, once the court does order a settlement, what will be disposed of is a sum of money, being the proceeds from the sale of the shares and not the actual shares themselves.

At the time of sale of the shares the taxpayer is not entitled to CGT rollover relief under section 126-5 and is, therefore, subject to tax on their share of the capital gain arising from the profit made from the sale.

Date of decision:  11 February 1999

Legislative References:
Income Tax Assessment Act 1997
   section 126-5

Keywords
Capital gains tax
CGT rollover relief
Marriage breakdown

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  4 June 2001

ISSN: 1445-2782

history
  Date: Version:
You are here 11 February 1999 Original statement
  16 January 2004 Archived

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