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Transferring CGT property on breakdown of a relationship: Avoiding capital gains tax for transactions dealt with in a Financial Agreement

Capital Gains Tax (CGT) is an important consideration for couples who have accumulated investment property during the course of a relationship which needs to be divided in the event that the relationship comes to an end.

Download Separation eBookUsually, transferring an investment property, even if only between spouse partners, will result in the transaction being assessed for capital gains tax.

However, capital gains tax can be avoided if the property is being transferred pursuant to a:-

  • Court order;
  • Binding Financial Agreement (since 2006); or
  • Other acceptable agreement.

In this case, what is termed as a “rollover” will apply.  The government delays receiving any CGT on the property until such later time as the party to whom the property (or part of the property) is being transferred to disposes of it.

This means that if property is being transferred to you, then you will be liable for CGT based on the cost of the asset when it was originally bought, at such time as you later sell or dispose of the property.

Full records need therefore to be kept, including records of the original purchase price of the investment property.

For more detailed information on how the transfer of CGT property is affected by the breakdown of a relationship, visit this ATO website

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