Edited version of your private ruling

Authorisation Number: 1012031491404

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: capital gains tax (CGT) made on the disposal of the property

Question and Answer

Question:

Is any capital gains tax (CGT) made on the disposal of the property disregarded?

Answer:

No.

This ruling applies for the following period

Year ended 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts and circumstances

Your former spouse purchased property after 20 September 1985

The property has been used as an investment property for the whole period of your former spouse's ownership and has been negatively geared.

You have separated from your former spouse.

Pursuant to consent orders, entered into as a result of a Family Court settlement, your former spouse transferred title to the property to you.

Pursuant to the consent orders, you have received all rent from the property from.

The property has recently been valued by a licensed valuer.

For the purposes of this private ruling you will sell the property and make a capital gain.

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 118-125

Income Tax Assessment Act 1997 section 126- 5

Reasons for decisions

Capital Gains Tax

A capital gain or a capital loss may arise if a capital gains tax event (CGT event) occurs to a capital asset. The disposal of the property, which is a CGT asset, causes a CGT event A1 to occur under the section 104-10 of Income Tax Assessment Act 1997 (ITAA 1997). You dispose of an asset when a change of ownership occurs from you to another person or entity.

Marriage breakdown roll-over

Where an asset is transferred to an individual's former spouse as a result of a marriage breakdown, there is an automatic roll-over in certain cases. The roll-over allows the transferor to disregard a capital gain or capital loss that would otherwise arise. The effect of this is that the party that receives the asset being the transferee will make a capital gain or loss when they dispose of the asset.

In order for the marriage breakdown roll-over to apply, the CGT event must have occurred due to:

· An order of a court or court order made by consent under the Family Law Act 1975 or a similar law of a foreign country;

· A maintenance agreement approved by a court under section 87 of that Act or a similar agreement under a foreign law, or

· A court order under a state, territory or foreign law relating to de facto marriage breakdowns.

· Marriage breakdown roll-over provisions apply to events that occur after 12 December 2006 due to one of the following:

· A financial agreement that is binding under section 90G of the Family Law Act 1975 (known as a binding financial agreement);

· An award made in an arbitration referred to in section 13H of this Act (known as an arbitral award);or

· A written agreement that is binding due to operation of a state or territory law relating to defacto marriage breakdowns and which cannot be overridden by an order of a court, except to avoid injustice.

If an asset is transferred under a contract, such as a binding financial agreement, the CGT event happens when the contract is entered into. If there is no contract, the CGT event happens when the change of ownership of the asset occurs. Transfers made due to an order of a court or arbitral award are not made under a contract. Accordingly, no CGT event happens until the asset is transferred under the award or order.

Conclusion

You have received the property as a result of a court order and accordingly upon receiving the asset you are taken to have acquired it at the time of transfer for the cost base of your former spouse. In your situation, you will be taken to have acquired the asset when it was transferred to you and for your former spouse's cost base.

As you acquired this property after 20 September 1985 and it was not your main residence for all of your ownership period the capital gain made is not disregarded.