Home » Capital Gains Tax and Family Law – Recent Legal Developments
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Argent Law

2 Stawell Street, Melbourne (Richmond) VIC 3121 (03) 9571 7444

Capital Gains Tax and Family Law

Often at Argent Law, our family law clients often need to consider the tax implications of their property settlements.
This is so in the common example of real estate being transferred as part of the property settlement, but also when other assets are transferred – such as companies, trusts, or shareholdings.
When it comes to tax matters, Argent Law works in conjunction with Argent Accounting.

CGT Rollover Relief for Relationship Breakdowns

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, there is (usually) an automatic rollover (if the conditions set out in Subdivision 126-A of the ITAA 1997 are satisfied). ‘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 transferors cost base of the asset is also transferred to the transferee spouse.

The rollover applies to CGT events that happen because of either:

  • an order of a court or a Court Order made by consent under the Family Law Act 1975, or a similar law of a foreign country; or
  • a court order under a state, territory or foreign law relating to the breakdown of relationship between spouses.

 

Recent Developments in the Law

Recently, the Federal Court has made clear in the case of Ellison v Sandini [2018] FCAFC 44(27 March 2018) that in order to be entitled to Capital Gains tax relief after a transfer of assets pursuant to a family law property settlement, the family law parties must strictly comply with the terms of the Family Law property settlement Orders.

This developing area of tax law relates to when a company or trustee distributes assets (including shares) to a party of the marriage as part of the family law property settlement – potentially giving rise to capital gains tax.  In such situations, a party to family law property orders may seek capital gains tax rollover relief.

The case also makes clear that errors in drafting the Orders may have unintended consequences for whether or not capital gains tax relief is available, due to ambiguity around the parties’ obligations under the Orders.

At Argent Law our lawyers have years of experience in drafting clear, enforceable Court Orders – and explaining these Orders to our clients.  We also encourage our clients to seek advice in relation to potential unforeseen tax consequences of the transferring of assets under

As such, Argent Law Clients know what their obligations are under the Orders, and the consequences – including tax consequences – of the Court Orders.

If you want to ensure that when Family Law Court Orders are made you fully understand the tax consequences, call Argent Law today to make an appointment with one of our experienced family lawyers.

stephanie
Stephanie Hope
Senior Family Lawyer
Stephanie@argentlaw.com.au
james
James Patterson
Principal Argent Accounting
jamesp@argentaccounting.com.au