CGT and Relationship Breakdown in Australia

Updated

When a marriage or de facto relationship breaks down, assets are often transferred between partners as part of a property settlement. In most cases, a CGT rollover applies — meaning no CGT is payable at the time of transfer. Instead, the CGT liability is deferred until the receiving spouse eventually sells the asset.

CGT Rollover for Relationship Breakdown

Under Australian tax law, an automatic CGT rollover applies when assets pass between former spouses (including de facto partners) as a result of:

  • A court order under the Family Law Act 1975
  • A binding financial agreement made under the Family Law Act
  • A court order under state or territory law for de facto relationships

The rollover means that:

  1. No CGT is triggered at the time of transfer
  2. The receiving spouse inherits the cost base of the asset (the same cost base the transferring spouse had)
  3. The acquisition date is also transferred — so the 12-month holding period carries over

How the Cost Base Transfers

The receiving spouse takes the transferred asset with the same cost base the transferring spouse had. The CGT liability is deferred — not eliminated.

Example:

  • John purchased investment property in 2015 for $400,000 (cost base)
  • On separation in 2025, the property (worth $700,000) is transferred to Mary under a family court order
  • No CGT arises at transfer — rollover applies
  • Mary’s cost base for the property: $400,000 (John’s original cost base)
  • If Mary sells for $800,000 in 2027: gain = $800,000 − $400,000 = $400,000 (less 50% discount if held >12 months from John’s original 2015 acquisition date)

The 12-Month Holding Period Carries Over

When the rollover applies, the receiving spouse inherits the acquisition date of the transferring spouse. This means:

  • If the asset was held by the transferring spouse for more than 12 months, the receiving spouse can immediately access the 50% CGT discount when they sell
  • The clock does not reset at the time of transfer

Transfers That Don’t Qualify for Rollover

The automatic rollover only applies if the transfer occurs under a court order or binding financial agreement. Informal arrangements between separating couples — without a formal legal document — do not attract rollover relief, and CGT may apply to the transfer.

Main Residence and Relationship Breakdown

If the marital home is transferred as part of a property settlement and it was the main residence of the transferring spouse throughout ownership, the receiving spouse inherits that main residence history. If the receiving spouse then lives in the property as their main residence and sells it, they may still access the full main residence exemption.

If neither spouse lived in the property after transfer (e.g., it was an investment), partial main residence rules may apply.

Child Support and CGT

Assets transferred to satisfy child support obligations do not automatically attract CGT rollover. These transfers may be separate CGT events.

Frequently Asked Questions

Do I pay CGT when I transfer property to my ex-spouse in a divorce? Generally not — if the transfer is under a family court order or binding financial agreement, an automatic CGT rollover applies. No CGT arises at the time of transfer.

Does my ex-spouse inherit my CGT liability? Yes, effectively. The receiving spouse takes on the same cost base (and therefore the deferred CGT liability) as the transferring spouse. When they eventually sell, CGT is calculated from the original cost base.

What if we settle informally without a court order? Without a formal court order or binding financial agreement, the rollover does not apply and CGT may be triggered on the transfer at market value. It is important to formalise property settlements under the Family Law Act.

This article provides general tax information for FY2025–26. For advice tailored to your situation, speak with a registered tax agent, family lawyer, or financial adviser. Find a tax agent through the Tax Practitioners Board register.