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Draft Taxation Determination

TD 1999/D74

Income tax: capital gains: if a court makes an order under the Family Law Act 1975 declaring or altering a spouse's interest in property, do CGT events happen to CGT assets of the spouse for the purpose of section 126-5 or 126-15 of the Income Tax Assessment Act 1997?

  • Please note that the PDF version is the authorised version of this draft ruling.
    This document has been finalised by TD 1999/48.

FOI status:

Not previously released in draft form

Preamble

Draft Taxation Determinations (DTDs) present the preliminary, though considered, views of the Australian Taxation Office. DTDs should not be relied on; only final Taxation Determinations represent authoritative statements by the Australian Taxation Office.

Section 78 of the Family Law Act 1975

1. If a court makes an order under subsection 78(2) of the Family Law Act 1975 (FLA 1975) giving effect to a declaration under subsection 78(1) of the FLA 1975 of a spouse's interest in property, no CGT event happens. The court order merely recognises existing interests in the property. There is no roll-over under section 126-5 of the Income Tax Assessment Act 1997 (ITAA 1997) or section 126-15 of the ITAA 1997 because no CGT event happens.

Section 79 of the Family Law Act 1975

2. If a court makes an order under section 79 of the FLA 1975 altering the interests of a spouse in property, a CGT event can happen because of the order. For example, the court might order an individual to dispose of their interest in it to their spouse. When the individual disposes of CGT assets in accordance with the order, CGT event A1 happens because of the court order.

3. Whether or not a CGT event happens because of an order under section 79 of the FLA 1975 depends on the terms of the order made by the court.

Note

4. A party might bring an action at law or in equity relying on contract, property or equity (particularly resulting trust or constructive trust) principles. If the court makes an order in such an action affecting the interests of a spouse, there is no roll-over under section 126-5 or 126-15 of the ITAA 1997 because:

•
the court order is not under the FLA 1975 or a corresponding foreign law;
•
there is no maintenance agreement approved by a court under section 87 of the FLA 1975 or a corresponding agreement approved by a court under a corresponding foreign law; or
•
the court order is not under a State, Territory or foreign law relating to de facto marriage breakdowns.

Your comments

5. We invite you to comment on this Draft Taxation Determination. We are allowing 4 weeks for comments before we finalise the Determination. If you want your comments considered, please provide them to us within this period.

Comments by Date: 15 September 1999
Contact officer details have been removed following publication of the final ruling.

Commissioner of Taxation
18 August 1999

References

ATO references:
NO 99/19509-6
BO CGT marriage breakdown summit 1999

ISSN 1038 - 8982

Subject References:
CGT asset
CGT event
CGT event A1
constructive trust
contract
court order
de facto marriage breakdown
disposal
equity
foreign law
interests in property
marriage breakdown
property
resulting trust
State law
Territory law
roll-over

Legislative References:
ITAA 1997 126-5
ITAA 1997 126-15
FLA 1975 78
FLA 1975 78(1)
FLA 1975 78(2)
FLA 1975 79


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