Talk­ing cap­i­tal gains tax in mar­riage sep­a­ra­tion

Townsville Bulletin - - Investor -

gains tax is­sues that arise as a re­sult of a mar­riage sep­a­ra­tion.

The cur­rent cap­i­tal gains tax leg­is­la­tion does al­low you to dis­re­gard a cap­i­tal gain for a prop­erty trans­ferred be­tween spouses as part of a mar­riage sep­a­ra­tion agree­ment.

But for the spouse ac­quir­ing the prop­erty, they will also in­herit their spouse’s cost base and their pre­vi­ous use. This means that they could be in­her­it­ing a sig­nif­i­cant cap­i­tal gains tax li­a­bil­ity when they even­tu­ally sell the prop­erty.

For ex­am­ple, Jenny ac­quires a prop­erty from her ex-spouse ( Barry) who had used the prop­erty the whole time as a rental prop­erty, and Jenny now uses the prop­erty as her main res­i­dence. When Jenny sells, she would be able to use Barry’s cost base for cal­cu­lat­ing the cap­i­tal gain.

Also, the use of the prop­erty as a rental prop­erty will need to be taken into ac­count to re­duce her main res­i­dence ex­emp­tion.

Of course it also works the other way. If Barry had used the prop­erty as his main res­i­dence the whole time be­fore their mar­riage, then it could mean that Jenny in­her­its Barry’s main res­i­dence ex­emp­tion.

Fi­nally, should the trans­fer of the prop­erty un­der the sep­a­ra­tion agree­ment have oc­curred be­fore Septem­ber 20, 2006, then you only need to take into ac­count your use since you ac­quired the prop­erty un­der the agree­ment. So ap­ply­ing this to the ear­lier ex­am­ple, Jenny could claim the main res­i­dence ex­emp­tion re­gard­less of what Barry used it for.

This ad­vice is gen­eral in na­ture and read­ers should seek spe­cial­ist ad­vice be­fore mak­ing de­ci­sions. WHK Pty Ltd ABN 84 006 466 351

Li­a­bil­ity lim­ited by a scheme ap­proved un­der Pro­fes­sional Stan­dards Leg­is­la­tion other than for the acts or omis­sions of fi­nan­cial ser­vices li­censees.

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.