What You Need to Know About the CGT Implications at the End of Your Relationship
When a relationship ends, dividing assets such as property, shares or investments can have tax consequences.
The good news is that the relationship breakdown CGT rollover may allow you to defer capital gains tax (CGT) when assets are transferred between separating spouses.
When does the rollover apply?
The rollover can apply when an asset is transferred because of a qualifying:
Family Court or other court order
Consent order
Binding financial agreement
The important point is that the transfer must be connected to the breakdown of the relationship and meet the relevant legal requirements.
What does the rollover do?
The rollover generally defers CGT rather than eliminating it.
Instead of paying CGT when the asset is transferred, the CGT consequences generally pass to the person receiving the asset. CGT may then apply when they eventually sell or otherwise dispose of it.
What if we simply agree between ourselves?
An informal or private agreement generally does not qualify for the rollover.
If an asset is transferred without a qualifying court order or formal agreement, the person transferring it may need to calculate and report any capital gain or loss at the time of the transfer.
Don't forget the paperwork
If the rollover applies, it must be used and reported correctly in your tax return. You'll also need to keep records of the asset, its CGT history and the agreement or court order supporting the transfer.
Getting advice early can help
Financial property settlements can involve significant assets, and the way a transfer is structured can affect the CGT outcome.
If you're separating or going through a divorce, it's a good idea to seek independent financial advice from an appropriately qualified financial adviser, as well as legal and tax advice, before transferring significant assets.
Getting advice early can help you understand your options and avoid unexpected financial or tax consequences.
This article provides general information only and is not legal, tax or financial advice. Your circumstances and the terms of your agreement or court order will determine whether the rollover applies.
