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Edited version of private advice
Authorisation Number: 1051596950798
Date of advice: 30 October 2019
Ruling
Subject: Rental property expenses and capital gains tax
Question 1
Are you assessable on 50% of the rental income of the property after the date of the court order?
Answer
No
Having considered your circumstances, and the relevant factors relating to your situation, the Commissioner accepts that there is sufficient evidence to establish that the equitable or beneficial interest is different from the legal title between the date of the court order until the name on the title deed was changed to be in just in your ex-partner's name. Therefore you are not required to declare any rental income or claim any expenses in relation to the rental of this property during that period.
Question 2
Is the capital gain or loss disregarded on the transfer of your 50% of the property to your former partner?
Answer
Yes
In your case, there will be a CGT event when you transfer your interest in the property to your ex-partner. The transfer of your interest in the property will happen because of court orders made on under the Family Law Act 1975. As such the relationship breakdown rollover provisions under section 126-5 of the ITAA 1997 will apply, allowing you to disregard any capital gain or capital loss made from the transfer of your interest in the property to your ex-partner.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You purchased a residential property (property 1) with your then partner as joint owners.
You resided at the property in a domestic arrangement until you separated several years later.
It was decided that you would both continue to reside at the property until you were able to move into another property (property 2).
During this time you both contributed to the mortgage repayments and other ownership costs.
You moved to property 2 some time later and nominated it as your main residence from that date.
After you vacated property 1, legal advice was sought to refinance and settle that property into your ex-partners name.
A court order under the Family Law Act 1975 was filed to document the agreement, to set a deadline for the settlement, and outline the financial responsibilities for each property.
Property 1 remained in both names for several months after the court order was made. You have not contributed to the expenses related to the property since you vacated the property.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subdivision126-A
Income Tax Assessment Act 1997 section 6-5
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