Marriage or relationship breakdown and real estate transfers

You can visit the ATO Publication Ordering Service to download a copy of the Marriage or relationship breakdown and real estate transfersExternal Link fact sheet.

Marriage or relationship breakdown rollover

Capital gains tax (CGT) generally applies to changes in ownership of an asset, such as real estate.

A marriage or relationship breakdown rollover may apply when the transfer of property results from a qualifying agreement.

This rollover means that you disregard any capital gain or loss made when you transfer the property to your spouse.

The transferor is the person, company or trustee of a trust transferring the property to their spouse because of a court order or other formal agreement. The transferor:

• disregards any capital gain or loss
• reports the rollover in their tax return.

The transferee spouse:

• has the property and cost base transferred to them because of a court order or other formal agreement
• will make a capital gain or loss when they later sell or dispose of the property.

If the transferee spouse already had a legal interest in the property, they must calculate their capital gain or loss separately to the interest transferred from the transferor.

If the transferred property was acquired by the transferor (or a company or trustee) before 20 September 1985, CGT doesn't apply. However, if the transferor made a major capital improvement to the dwelling on or after 20 September 1985 the improvements are separate assets and may be subject to CGT.

How to include your relationship rollover in your tax return

If you are lodging your tax return using myTax, in the Personalise your return section:

• select You had Australian interest, or other Australian income or losses from investments or property
• select Capital gains or losses that are not from a managed fund or Trust distribution
• select Add/edit for the capital gains or losses section
• select Yes to Have you applied an exemption/rollover or additional discount?
• under the heading Capital gains tax exemption, rollover or additional discount type code, select S: Same asset roll-overs (Division 126) from the drop-down list.

If a rollover doesn't apply

The rollover doesn't apply to property that's transferred under a private or informal arrangement. This includes anything outside of a court order or binding financial or formal agreement.

The transferor:

• Is the person, company or trustee of a trust transferring the property under a private or informal arrangement.
• Must consider any capital gain or loss made from the transfer and report this in their tax return for that year.
• Is taken to have received the market value of the property for CGT purposes where the dealings are not arm's length.

The transferee spouse:

• Has the property transferred to them under a private or informal arrangement and is taken to have acquired it at the time of transfer.
• Will make a capital gain or loss when they later sell or dispose of the property.
• Is taken to have acquired the property at market value for CGT purposes where the dealings are not arm's length.

Note: An arm's length dealing is where each party acts independently and without influence or control over the other.

To determine the property's market value at the time of transfer, you should get a professional market valuation.

Calculating CGT on a property received under a relationship breakdown rollover

When you sell or dispose of a property transferred to you under a relationship breakdown rollover, you need to calculate the CGT as though you had owned the property since your former spouse acquired it.

If the property was the main residence of you or your former spouse, you can generally claim a full or partial main residence exemption depending on your circumstances.

When working out your eligibility for the 50% CGT discount, include the period your former spouse owned the property when calculating the ownership period.

If the rollover property was acquired by your former spouse before 20 September 1985, it's not subject to CGT. However, any subsequent major capital improvements to the property are considered separate assets and are subject to CGT.

For more information, see Calculating CGT on a rollover asset and Main residence exemption in relationship breakdown.

Record keeping

Keep records relating to your ownership and all costs of acquiring, owning, and disposing of property including:

• the court order or formal agreement relating to the property transfer
• contract of purchase and sale
• stamp duty
• major renovations.

Ensure you have records from your spouse, including records that show:

• how and when they acquired the property (or the interest in it)
• the cost base of the property when they transferred it to you
• the extent (if any) the property was used to produce income during their ownership period (for example, the periods when it was rented out or available for rent) and the portion used for that purpose
• the number of days (if any) it was their main residence during their ownership period.

You must hold records for at least 5 years after the sale of the property, or the year you declare a capital gain.

If you make a capital loss, once you've offset the loss against a capital gain, keep records for another 2 years.

 

As this is a complex topic, it may not meet your individual circumstances. If you're uncertain, seek professional advice relevant to your circumstances.

This is a general summary only.

For more information:

• see Involuntary disposal of a CGT asset
• download our Rental properties guide
• read our Capital gains tax guide.