Disclaimer
This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1012743286753

Ruling

Subject: Marriage breakdown rollover

Question 1

Will you be responsible for the entire capital gain or loss on the disposal of the property?

Answer

Yes

This ruling applies for the following period:

Income year ended 30 June 2014

The scheme commences on:

August 2013

Relevant facts and circumstances

In X you purchased a property with your spouse.

On X you moved into the property and it became your main residence. The property had previously been a rental investment property.

On X your spouse moved out of the property.

On X a Family Court Order was made by consent. It provided that you must do all acts and things and your spouse must execute all documents, instruments and writing necessary to transfer to you, your spouse's right to title and interest in the property.

You contracted to sell the property to a third party.

You believe your spouse was tardy in supplying the signed and witness transfer documents which resulted in a specific clause in the subsequent sale contract and ultimately the transfer taking place 10 days after settlement.

Settlement of the property to a third party occurred on X.

The transfer of your spouse's interest in the property to you occurred on X.

The transfer from you to the third party also occurred on X.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 102-20

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 126-5

Reasons for decision

Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you make a capital gain or capital loss if, and only if, a capital gains tax (CGT) event happens to a CGT asset.

Section 104-10 of the ITAA 1997 describes the most common CGT event, being CGT event A1. It provides that CGT event A1 happens if you dispose of a CGT asset. Subsection 104-10(2) defines a disposal as:

Subsection 104-10 (3) of the ITAA 1997 provides that the time of the event is when you enter into the contract for the disposal, or if there is not contract when the change of ownership occurs. The note to this subsection provides that if a contract falls through before completion, this event does not happen because no change in ownership occurs.

In you circumstances, your spouse was not a party to the contract and therefore you could not effectively transfer title in the property under the contract until you had title. Consequently we consider the CGT event to have occurred when ownership changed on the X after your spouse transferred her share in the title to you. As this transfer from your spouse to you was due to Family Court order the marriage breakdown rollover will apply under subdivision 126-A of the ITAA 1997.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).