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Edited version of private ruling
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Ruling
Subject: Marriage breakdown rollover
Question 1
Does the marriage breakdown rollover apply where you and your spouse enter into a binding financial agreement to transfer property?
Answer
Yes
This ruling applies for the following period:
Year ending 30 June 2011
The scheme commences on:
1 July 2010
Relevant facts and circumstances
You are your spouse have separated and there is no likelihood of reconciliation.
You and your spouse are in the process of drawing up a binding financial agreement made under Part VIIII of the Family Law Act 1975
The proposed agreement will outline that the jointly owned family home is to be transferred to you.
Relevant legislative provisions
Section 126-5 of the Income Tax Assessment Act 1997
Section 126-25 of the Income Tax Assessment Act 1997
Reasons for decision
Section 126-5 of the Income Tax Assessment Act 1997 outlines that if an asset or an interest in an asset is transferred by a person to their spouse as a result of the breakdown of their marriage or relationship; rollover applies provided certain conditions are met.
The conditions include that the transfer has to happen because of a court order, a binding financial agreement made under Part VIIIA of the Family Law Act 1975, an arbitral award or a binding agreement or award relating to the break down of relationships between spouses.
Subsection 126-5(2) of ITAA 1997 outlines there must be a relevant CGT event such as A1 and B1 (a disposal case) and CGT events D1, D2, D3 and F1 (a creation case).
For transfers that happen because of a binding financial agreement, an arbitral award or binding agreement or award relating to the breakdown of relationships between spouses, rollover only applies if the CGT:
· Event happens after 12 December 2006
· The spouse involved are separated
· There is no reasonable likelihood of cohabitation being resumed and
· The transfer happened because of reasons directly connected with the breakdown of the marriage.
You and your spouse are separated and there is no reasonable likelihood of reconciliation. You will enter into a binding financial agreement under the Family Law Act 1975. Under the arrangement the property transfer will result in a relevant CGT event happening. Accordingly the marriage breakdown rollover will apply to you.