ATO Interpretative Decision
ATO ID 2008/103 (Withdrawn)
Income Tax
Capital gains tax: marriage breakdown roll-over - transfer to legal personal representativeFOI status: may be released
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This ATO ID is withdrawn. Guidance relating to the issue addressed in this ATO ID can be found in the Guide to capital gains tax (NAT 4151) as part of the Tax Time 2017 refresh.This document has changed over time. View its history.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Will marriage breakdown roll-over under Subdivision 126-A of the Income Tax Assessment Act 1997 (ITAA 1997) apply if a CGT asset is transferred to the legal personal representative (LPR) of a deceased former spouse of another individual pursuant to a consent order made under the Family Law Act 1975?
Decision
No. The transfer of a CGT asset to the LPR will not satisfy the conditions for roll-over under Subdivision 126-A of the ITAA 1997.
Facts
Property settlement proceedings were commenced in the Family Court of Australia following the breakdown of a marriage.
A former spouse died before completion of the court proceedings and their LPR was substituted as a party to the proceedings.
Pursuant to a consent order made under the Family Law Act 1975, it is proposed that the trustee of a discretionary trust will transfer an asset, which the trustee acquired before 20 September 1985, to the LPR.
Reasons for Decision
A CGT roll-over applies in respect of certain CGT events (trigger events) that happen as the result of the breakdown of a marriage (Subdivision 126-A of the ITAA 1997).
Paragraph 126-15(1)(a) of the ITAA 1997 provides that there are the roll-over consequences in section 126-5 of the ITAA 1997 if the trigger event 'involves' a trustee and a spouse or former spouse of an individual because of a court order under the Family Law Act 1975.
Subsection 126-15(1) of the ITAA 1997 is a rewrite of subsection 160ZZMA(1) of the Income Tax Assessment Act 1936 (ITAA 1936). Under section 160ZZMA of the ITAA 1936, roll-over was available if an asset was transferred from a trustee to a spouse or former spouse.
Chapter 2.17 of the Explanatory Memorandum to the Tax Law Improvement Bill (No 1) 1998 indicates that the change of wording from 'to' to 'involves' was not intended to affect the scope of the roll-over. Accordingly, having regard to section 1-3 of the ITAA 1997, the issue is merely whether a reference to a spouse or former spouse includes that person's LPR.
The Board of Review in Case C84 71 ATC 378; (1971) 17 CTBR (NS) Case 81 concluded that on a proper construction of the provision under consideration in that case (paragraph 87(1)(c) of the ITAA 1936), a payment to an executor (who is an LPR of a deceased individual) was not to be treated as if it had been made to the deceased individual. Similarly, it is considered that in the context of the marriage breakdown roll-over, 'spouse' should not be read as including an LPR.
Having regard to section 1-3 of the ITAA 1997, the idea expressed in section 160ZZMA of the ITAA 1936, that the disposal of an asset will only be subject to the roll-over if it is to the former spouse (or spouse), is not to be taken to be different just because different forms f words were used in the 1997 rewrite.
As the relevant asset will be transferred to the LPR, and not to the requisite spouse or former spouse, it follows that Subdivision 126-A of the ITAA 1997 will not apply to the transfer.
Date of decision: 24 June 2008Year of income: Year ended 30 June 2008
Legislative References:
Family Law Act 1975
The Act
section 160ZZMA
subsection 160ZZMA(1) Income Tax Assessment Act 1997
section 1-3
sub-division 126-A
section 126-5
paragraph 126-15(1)(a)
Case References:
Case C84
71 ATC 378
(1971) 17 CTBR (NS) Case 81
Other References:
Tax Law Improvement Bill (No. 1) 1998 - Senate - Explanatory Memorandum
Keywords
Capital gains tax
CGT event A1-disposal of a CGT asset
CGT marriage breakdown
CGT roll-over relief
CGT same asset roll-over
ISSN: 1445-2782
| Date: | Version: | |
| 24 June 2008 | Original statement | |
| You are here | 9 June 2017 | Archived |