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Edited version of private advice
Authorisation Number: 1012636554257
Ruling
Subject: Capital Gains Tax - marriage breakdown
Question
Are you entitled to CGT roll-over relief for the transfer of ownership interest of the property X as a result of marriage breakdown?
Answer:
No
This ruling applies for the following periods
Year ended 30 June 2013
The scheme commences on
1 July 2012
Relevant facts and circumstances
You acquired property X jointly with your spouse before 20 September 1985.
You used property X as your main residence until you and your spouse moved to your new property Y a few years later.
Property Y was jointly owned by you and your spouse.
Property X was rented since you and your spouse moved to property Y until your marriage breakdown.
The marriage breakdown occurred after 1985 and before 1990.
You moved back to property X immediately after the marriage breakdown.
Upon the marriage breakdown, you and your ex-spouse executed a written property agreement wherein you and your ex-spouse agreed, amongst other things, that you would transfer your ownership interest in property Y to your ex-spouse and your ex-spouse would transfer her ownership interest in property X to you.
You lived in property X as your main residence for a number of years. Then you moved to property Z.
You rented property X once you moved to property Z until property X was demolished a few years ago. The vacant block was sold in 2013 income tax year.
The written property agreement between you and your ex-spouse was not submitted to the Family Court and, therefore, you did not acquire your ex-spouse's ownership interest in property X as a result of an order of a court or a court order made by consent under the Family Law Act 1975.
It is now over 20 years since the property agreement was executed and neither you nor your ex-spouse can find a copy.
Relevant legislative provisions
Income Tax Assessment Act 1936 (ITAA 1936) Subsection 160ZZM(1)
Reasons for decision
Your marriage breakdown happened after 1985 and before 1990. At the time, subsection 160ZZM(1) of ITAA 1936 needed to be applied to consider asset roll-overs in the context of a marriage breakdown.
Subsection 160ZZM(1) of ITAA 1936 states that where a taxpayer disposes of an asset to his or her spouse, if the asset was acquired by the taxpayer before 20 September 1985, the spouse shall be deemed to have acquired the asset before that date (pre-CGT), given the taxpayer disposes of the asset to his or her spouse pursuant to:
(a) an order of a court under the Family Law Act 1975 or under a corresponding law of a foreign country; or
(b) a maintenance agreement approved by a court under section 87 of the Family Law Act 1975 or a corresponding agreement approved by, or otherwise sanctioned by, a court under a corresponding law of a foreign country.
In your case, the transfer of ownership interest in property X happened between 1985 and 1990. The ownership interest transferred to you was acquired by your ex-spouse before 20 September 1985. However, the property agreement executed by you and your ex-spouse was not an order of a court or a court order made by consent under the Family Law Act 1975.
Therefore, the ownership interest transfer did not satisfy an asset roll-over under subsection 160ZZM(1) of ITAA 1936. Whether you can still recover a copy of the agreement is not relevant in this case.
As a result, you will be liable for any capital gain made on the property ownership interest being transferred into your name, upon disposal.