Edited version of private advice

Authorisation Number: 1052273990886

Date of advice: 12 July 2024

Ruling

Subject: CGT - transferring property to spouse

Question

Did the transfer of 50 percent of your interest in the property to your current spouse trigger a CGT event under section 104-10 of the ITAA 1997?

Answer

Yes.

Question

Is the first element of the property's cost base your cost base, plus your ex-spouse's cost base of the property at the time the ex-spouse transferred the asset to you?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

XX August 20XX

Relevant facts and circumstances

You and your ex-spouse purchased an investment property (the property) on XX September 20XX.

You held an XX percent ownership interest in the property and your ex-spouse held a XX percent ownership interest in the property.

You and your ex-spouse were divorced 20XX and you received the other XX percent interest in the property under a court order on that date.

You subsequently remarried.

You decided to transfer 50 percent of the interest in the property to your current spouse as a gift on XX August 20XX with no exchange of any funds.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 102-20

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 subsection 108-5(1)

Income Tax Assessment Act 1997 subsection 126-5(5)

Reasons for decision

Question 1

Detailed reasoning

All legislative references are to the ITAA 1997 unless otherwise stated.

Section 102-20 states that a taxpayer can make a capital gain or capital loss if and only if a CGT event happens. The gain or loss is made at the time of the event.

Section 104-10 provides that a CGT event A1 happens if a taxpayer disposes of a post-CGT asset. A taxpayer disposes of a CGT asset if a change of ownership occurs from the taxpayer to another entity. The time of the CGT event is either when the taxpayer enters into a contract for the disposal, or if there is no contract when the change of ownership occurs.

Section 108-5(1) provides a CGT asset is any kind of property or a legal or equitable right that is not property.

In this case, you disposed a post-CGT asset by transferring 50 percent of the ownership interest in the property to your current spouse, therefore, CGT event A1 was triggered even though there was no exchange of any funds. You are unable to disregard any capital gain or capital loss that results.

However, because you solely owned the property for more than 12 months, you are entitled to the 50 percent CGT discount in relation to the property.

Question 2

Detailed reasoning

To calculate your capital gain or loss, you will need to determine the cost base of the property.

Subsection 126-5(5) provides that the first element of the asset's cost base for a person who acquires a property as result of the marriage rollover provision is the cost base of the transferor at the time of the transfer.

In your case, your ex-spouse transferred their XX percent interest in the property to you. Therefore, the first element of the asset's cost base is the cost base of your XX percent ownership interest plus the cost base of your ex-spouse's ownership interest at the time of the transfer.

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).