Edited version of private advice

Authorisation Number: 1052439188608

Date of advice: 4 September 2025

Ruling

Subject: CGT - cryptocurrency, marriage breakdown rollover and disposal

Question 1

Did CGT event A1 happen to you when you disposed of your cryptocurrency assets in order to repay the company loan?

Answer

Yes.

Question 2

Is the first element of the cost base of the cryptocurrency assets transferred to you under the divorce agreement the cost base of the assets in the hands of your ex-spouse at the time you acquired them?

Answer

Yes.

This private ruling applies for the following period:

•         year ended 30 June 20YY

•         year ended 30 June 20YY

•         year ended 30 June 20YY

The scheme commenced on:

DD MM 20YY

Relevant facts and circumstances

You are the Director, Secretary and sole shareholder of Company A, registered Business Name A, ACN XXX XXX XXX.

The Final Order under the Family Law Act 1975,between ex-spouse (Person B) and Person A dated DD MM 20YY states:

1.              On or within seven (7) days of the date of these Orders, Person B do all acts and sign all documents necessary to:

a)    Return control of your cryptocurrency to you by transferring into a digital wallet nominated in writing by you x units of Crypto Asset A;

b)    Return control of the cryptocurrency belonging to Company A to you (in their capacity as sole director of the said company) by transferring into a digital wallet nominated in writing by you the following:

                          i.    x units of Crypto Asset B

                         ii.    x units of Crypto Asset C

                        iii.    x units of Crypto Asset D.

c)     Transfer to you all right, title, and interest (and free from any encumbrances) in the following cryptocurrency from Person B's digital wallet into a digital wallet nominated in writing by you:

                          i.    x units of Crypto Asset B

                         ii.    x units of Crypto Asset C, and

                        iii.    x units of Crypto Asset D.

2.              That on or within seven (7) days of Order 1 being effected:

a)    Person B reimburse you in equivalent Australian Dollars fifty percent (50%) of all transaction/transfer fees (and like charges) debited or incurred on the transfers referred to in Orders 1(a), (b), and (c);

b)    You do all acts and sign all documents necessary to transfer to Person B cc units of their Crypto Asset A.

c)     That Person B is prohibited by injunction from selling, transferring, or otherwise disposing of their interests in the cryptocurrency in their name and or control until such time as they complied with Order 1, save to give effect to Order 1.

d)    That you are prohibited by injunction from selling, transferring, or otherwise disposing of their interests in the cryptocurrency in your name and or control until such time as you complied with Order 2(b), save to effect the transfer permitted under Order 2(b).

You signed a Loan Agreement with Business Name A, on DD MM 20YY. It contained:

•       The loan was at the company's discretion and applies to all loans made by the company to you since the agreement date until the total principal loaned reached AUD XXX.

•       From DD MM 20YY interest was payable on the outstanding amount at the Benchmark Interest Rate as defined in the Income Tax Assessment Act 1936.

The loan agreement provided the amount of the capping amount of the loan, and it was made before the divorce property agreement. Thus, the capping amount and the family home was included in the loan agreement. After the divorce agreement things changed, where you did not purchase the family home from Person B, but the principles of the loan agreement stayed such as interest rate, repayment terms. Eventually the loan transaction happened in 20YY, and the loan amount was much smaller than the original capping amount. The transaction from the company to you happened in MM and MM of 20YY, totalling $XX, under the enclosed loan agreement. That was used to purchase your current residence.

In MM 20YY you repaid a company loan with cryptocurrency you received from Person B in the divorce Property Order, which happened in MM 20YY.

The repayment was documented by a transaction recording in MM 20YY and the market price of the transaction was witness by a Justice of the Peace.

Your email dated DD MM 20YY provided the dates and the value of the cryptocurrency transferred to you and disposed by you. You could not find the value of any fees and charges relating to the disposal.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 103-10

Income Tax Assessment Act 1997 section 104-10

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

Income Tax Assessment Act 1997 subsection 108-5(2)

Income Tax Assessment Act 1997 section 116-20

Income Tax Assessment Act 1997 Subdivision 126-A

Income Tax Assessment Act 1997 section 126-5

Income Tax Assessment Act 1997 subsection 126-5(4)

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

Reasons for decision

Marriage or relationship breakdown roll-over

You make a capital gain or capital loss if a capital gains tax (CGT) event happens. The most common event is CGT event A1 which occurs if you dispose of a CGT asset, such as when your ownership interest in a property is disposed of to another party under section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997).

Under subsection 108-5(1) of the ITAA 1997, a CGT asset is any kind of property or legal or equitable right that is not property. A CGT asset is also part of, or in interest in the CGT asset under subsection 108-5(2) of the ITAA 1997.

The capital proceeds under section 116-20 of the ITAA 1997 are about the cash received or receivable and the market value of property received or receivable. The meaning of received or receivable is expanded by section 103-10 of the ITAA 1997 to specifically include the use of funds to pay down a loan.

Subdivision 126-A of the ITAA 1997 provides that where an asset is transferred from your ex-spouse to you as a result of a relationship breakdown, there is an automatic roll-over where the necessary conditions have been met.

The roll-over allows the spouse doing the transferring, being the transferor, to disregard a capital gain or capital loss that would otherwise arise as a result of the transfer of their CGT asset to their spouse/ex-spouse, being the transferee. The CGT which normally applies when ownership of an asset changes is effectively deferred.

Once the transfer of a CGT asset is completed, the person who received the CGT asset from their spouse/ex-spouse will be subject to any CGT when a CGT event happens to the CGT asset in the future, such as when they dispose of it.

Section 126-5 of the ITAA 1997 states that to be eligible for the roll-over, the CGT event must occur because of one of certain things occurring, including, an order of a court or court order made by consent under the Family Law Act 1975.Subsection 126-5(4) of the ITAA 1997 states that a capital gain or a capital loss the transferor makes from the CGT event is disregarded.

In your case the court order made by consent under the Family Law Act 1975 required your ex-spouse (Person B) to:

a)    Return control of your cryptocurrency to you by transferring into a digital wallet nominated in writing by you xx units of Crypto Asset A;

b)    Return control of the cryptocurrency belonging to Company A to you (in your capacity as sole director of the said company) by transferring into a digital wallet nominated in writing by you the following:

                           i.         xx units of Crypto Asset B

                          ii.         xx units of Crypto Asset C

                         iii.         xx units of Crypto Asset D.

c)     Transfer to you all right, title, and interest (and free from any encumbrances) in the following cryptocurrency from Person Bs digital wallet into a digital wallet nominated in writing by you:

                         i.         xx units of Crypto Asset B

                       ii.         xx units of Crypto Asset C, and

                      iii.         xx units of Crypto Asset D.

That on or within seven (7) days of Order 1 being effected:

a)    Person B reimburse you in equivalent Australian Dollars fifty percent (50%) of all transaction/transfer fees (and like charges) debited or incurred on the transfers referred to in Orders 1(a), (b), and (c);

b)    You do all acts and sign all documents necessary to transfer to Person B xx units of your Crypto Asset A.

Position of transferee (you)

Subsection 126-5(5) explains that, for a disposal case where the transferor (Person B) acquired the asset on or after 20 September 1985, the first element of the asset's cost base (in the hands of the transferee - you) is the asset's cost base (in the hands of the transferor) at the time the transferee (you) acquired it. The cost base in the hands of Person B includes the value of the cryptocurrency on the day they originally acquired it.

This applies, where the following assets were owned by Person B:

•     when he returned of control of your Crypto Asset A to you, and

•     the transfer of xx units of Crypto Asset B, xx units of Crypto Asset C, and xx units of Crypto Asset D to you from Person B.

Therefore, you are unable to use the market value of the crypto assets at the time they were transferred to you by your ex-spouse for the first element of the cost base.

If Crypto Asset A was always legally owned by you, and Person B only held these in their digital wallet then your first element of the cost base would be when the asset was acquired by you.

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