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Edited version of your written advice
Authorisation Number: 1051185299875
Date of advice: 27 January 2017
Ruling
Subject: Capital gains tax - marriage breakdown rollover
Question 1
Will the rollover provisions under Subdivision 126-A of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the asset when transferred from your former spouse to you?
Answer
Yes.
This ruling applies for the following period:
The year ending 30 June 20ZZ.
The scheme commences on:
1 July 20YY.
Relevant facts and circumstances
You purchased a pre-CGT property (the property) with your spouse as joint owners.
You and your spouse separated in 20XX.
As part of the separation settlement, you obtained your former spouse's interest in the property.
You acquired your former spouse's interest in the property under an order of the Family Court of Australia.
Relevant legislative provisions
Income Tax Assessment Act 1997 Part 3-1
Income Tax Assessment Act 1997 Part 3-3
Income Tax Assessment Act 1997 Section 126-5
Reasons for decision
Summary
The rollover provisions under Subdivision 126-A of the (ITAA 1997) will apply. You are taken to have acquired your former spouse's share in the asset before 20 September 1985.
Detailed reasoning
As a general rule, capital gains tax (CGT) applies to all changes of ownership of assets on or after 20 September 1985. However, if you transfer an asset to your spouse as a result of the breakdown of your marriage or relationship, there is automatic rollover in certain cases.
The rollover applies if your marriage or relationship ended on or after 20 September 1985, and:
● you transfer an asset or a share of an asset to your spouse
● you receive an asset or a share of an asset from your spouse, or
● a company or trustee of a trust transfers an asset to you or your spouse.
For the rollover to apply, the CGT event must have happened because of:
● an order of a court or a court order made by consent under the Family Law Act 1975, or a similar law of a foreign country, or
● a court order under a state, territory or foreign law relating to breakdown of relationship between spouses.
Where the conditions for the relief are met, the relief applies automatically; it is not necessary for the taxpayer to elect for the relief to apply and it is not possible to elect that it not apply.
In your situation, you received your former spouse's interest in the property as a result of a court order under the Family Law Act 1975, and therefore the marriage rollover provisions will apply. In this case, you are taken to have acquired the asset before, 20 September 1985.
Assets acquired by the transferor before 20 September 1985
If a CGT asset, including a share of a jointly owned asset, was transferred to you because of the breakdown of your marriage or relationship and it was acquired by the transferor before 20 September 1985, you are also taken to have acquired the asset before that date. You disregard any capital gain or capital loss you make when you later dispose of the asset.
However, if you make a major capital improvement to that asset after 20 September 1985, you may be subject to CGT when you dispose of it or another CGT event happens to that asset.