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Edited version of private advice
Authorisation Number: 1051982035639
Date of advice: 12 May 2022
Ruling
Subject: CGT - marriage breakdown rollover
Question: Will the marriage breakdown rollover provisions under Subdivision 126-A of the Income Tax Assessment Act 1997 (ITAA 1997) apply to enable you to disregard the capital gain or capital loss made on the disposal of your ownership interest in the subdivided lot?
Answer: Yes. You will transfer your respective ownership interest in a subdivided lot to each other in compliance with a court order made under the Family Law Act 1975, resulting in you each having sole ownership interest in one subdivided lot and newly constructed dwelling.
Therefore, as the conditions for the marriage breakdown rollover under section 126-5 of the ITAA 1997have been met, in accordance with the principles contained in Taxation Determination 1999/60 the rollover will automatically apply. As a result, you can disregard the capital gain or capital loss made from the transfer of your ownership interest in one of the subdivided lots and newly constructed dwelling to the other in accordance with the court order.
This ruling applies for the following periods:
Income year ending 30 June 20XX.
Income year ending 30 June 20XX.
The scheme commences on:
1 July 20XX.
Relevant facts and circumstances
You, being Person A and Person B, jointly purchased a property (the Property) after 20 September 1985 where you lived for many years.
You decided to demolish the existing house located on the Property, subdivide the land into two lots, and construct a new dwelling on each subdivided lot.
A contract to construct the dwellings was entered, with the house being demolished, and the construction of the dwellings commencing. You are in the process of having the Property subdivided.
You separated during the ruling period and as part of the property transfer you will each acquire the others ownership in one of the subdivided lots and newly constructed dwelling so that you each have a sole ownership interest in one of the subdivided lots and dwellings.
You are currently in the process of obtaining an order of a court, or court order made by consent under the Family Law Act 1975.
It is anticipated that the court order will be granted during the ruling period, and after it is granted you will transfer your respective ownership interest in one subdivided lot and dwelling to the other, with you each having sole ownership interest in one subdivided lot and dwelling in accordance with the court order.
A capital gains tax event A1 will occur when you transfer your respective 50% ownership interest to the other.
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 126-5