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Edited version of your written advice
Authorisation Number: 1051371901551
Date of advice: 10 May 2018
Ruling
Subject: Capital gains tax – acquisition - disposal
Question
Is any capital gain or capital loss you make on the sale of your interest in property 2 disregarded?
Answer
No.
This ruling applies for the following periods:
Year ending 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts
You and your spouse acquired a dwelling prior to 20 September 1985. (Property 1)
You and your spouse separated after a number of years.
You and your spouse did not divorce or enter into a binding financial agreement.
You and your spouse jointly acquired another property. (Property 2)
Your spouse continued to reside in property 2 until recently when you reconciled.
You and your spouse sold property 2 a short time later.
You have always resided at property 1.
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 108-05
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 116-20
Income Tax Assessment Act 1997 Section 116-30
Income Tax Assessment Act 1997 subdivision 126-A
Income Tax Assessment Act 1997 Section 126-5
Reasons for decision
Capital gains tax provisions
A capital gain or capital loss is made only if a capital gains tax (CGT) event happens to a CGT asset. Property 2 is a CGT asset.
CGT event A1 happens if you dispose of a CGT asset. You dispose of a CGT asset if a change of ownership occurs from you to another entity. CGT event A1 happened when you sold property 2.
You make a capital gain if the capital proceeds from the disposal are more than the asset’s cost base. You make a capital loss if those capital proceeds are less than the asset’s reduced cost base.
CGT generally applies to all changes of ownership of assets acquired on or after 20 September 1985. However, Subdivision 126-A of the ITAA 1997 outlines the circumstances where a capital gain may be rolled-over following a marriage breakdown.
If certain conditions are met there is an automatic roll-over of the capital gain for the transferring spouse if a CGT event happens as a result of a marriage breakdown. Under paragraph 126-5(1)(a) of the ITAA 1997 there is a roll-over if a CGT event happens because of a court order under the Family Law Act 1975.
In your case, there was no CGT event that happened because of a court order. The CGT event that occurred when you sold the dwelling, a number of years after the separation, did not happen because of any court order.
Your individual circumstances are acknowledged, however the Commissioner has no discretion to apply the roll-over or CGT exemption. The Commissioner can only consider what actually occurred rather than what was intended to occur. That is, the legislation applies to what in fact happened rather than what may have been in mind at some earlier point in time.
In your circumstances, the normal CGT rules will apply to the disposal of property 2.