Marriage/Relationship breakdown and Capital Gain Tax.
Normally capital gains tax (CGT) applies to any change of ownership of an asset. However, if you transfer an asset to your spouse because of the breakdown of your marriage or relationship, you may be eligible for a rollover of the asset.
'Rollover' means the transferor spouse disregards the capital gain or loss that would otherwise arise. In effect, the person who receives the asset (the transferee spouse) will make the capital gain or loss when they subsequently dispose of the asset. The cost base of the asset is also transferred to the transferee spouse.
The most common jointed assets involved to transfer in marriage / relationship breakdown are:
Real estate including principal place of residence (home) , rental property
Shares
Jewellery
Capital gain tax implication to each category of assets varies and the subsequence of capital gain tax may be substantial and stressed to manage.
Scenario 1 : Couple lived in an apartment unit as main residence for 9 years, and Transferee acquired this property and stayed in the same place for another year before Transferee sell this property. No capital gain applied throughout 10 years as principal place of residence is capital gain tax exempted.
Scenario 2: Couple jointly owned rental property for 9 years, transferee receive this rental property and move in this property as principal place of residence for another year. Capital Gain tax may be fully liable to transferee for period when property held as non - principal place of residence. Ie. 9 out 10 years
Tips:
Capital gain tax applied on marriage / relationship break down situation is complicate, and should appoint a separate tax advice to represent each party. Please send email to info@tagpl.com.au for further advice, an capital gain tax specialist will be contacted you shortly.
Last Modified: 01 July 2020
Source from ATO QC 52251
Please check the latest relevant legislations or contact us for details advice.
