How to calculate CGT on a rollover asset
If an asset is transferred to you under a relationship breakdown rollover, you do not pay capital gains tax (CGT) until you later dispose of it.
When you dispose of a rollover asset, you calculate your CGT as though you had owned it since your former spouse acquired it.
To calculate your capital gain or loss on the asset, take its capital proceeds (usually the amount you sold it for) and subtract:
- the asset's cost base at the time of the transfer – this is the first element of your cost base (the acquisition cost)
- any costs incurred in transferring the asset to you
- this may include conveyancing costs and stamp duty
- this does not include general legal costs relating to the relationship breakdown or property settlement
- any capital costs (that are not deductible against income) you incurred on the asset while you owned it.
If the asset was acquired by your spouse before 20 September 1985, it is not subject to CGT. Any subsequent major capital improvements to the asset are subject to CGT.
CGT discount on a rollover asset
To be eligible for the 50% CGT discount on an asset, you must have owned it for 12 months or more.
When working out how long you owned the asset, you include the period your former spouse owned it.
Superannuation assets
A CGT asset of a small super fund (one with no more than 6 members) can be transferred to another complying super fund under the relationship breakdown rollover. The consequences of the rollover are the same as for other transfers between spouses.
This allows spouses in a small super fund to separate their super arrangements on the breakdown of their relationship without any CGT liability.
Assets transferred by a company or trust
If a company or trust transfers a CGT asset to a spouse, the cost base and reduced cost base of interests in the company or trust need to be adjusted. They are reduced in value by an amount that reflects the fall in their market value from the transfer of the CGT asset.
In some circumstances, the transfer of an asset from a company to a spouse who is a shareholder or an associate of a shareholder may be a dividend under Division 7A. In this case CGT does not apply.
If the transferor is a controlled foreign corporation or a foreign trust, there are special rules for working out the capital gain or loss for a subsequent CGT event.
Newly created assets
Your spouse (or a company or trustee) may create an asset in your favour.
|
CGT event |
First element (acquisition cost) of cost base and reduced cost base |
|---|---|
|
Creating contractual or other rights (D1) |
Incidental costs incurred by the transferor to create the right |
|
Granting an option (D2) |
Expenditure incurred by the transferor to grant the option |
|
Granting a right to income from mining (D3) |
Expenditure incurred by the transferor to grant the right |
|
Granting a lease (F1) |
Expenditure incurred by the transferor on the grant renewal or extension of the lease |
For CGT purposes you acquire the asset at the time specified by the CGT event. For example, for CGT event D1, you acquire the asset at the time you enter into the contract or, if there is no contract, the time the right is created.
Find out when CGT applies to an asset after a relationship breakdown, and how to work out the asset's cost.