How Relationship Breakdown CGT Rollover Works
How it works
When a CGT asset is transferred between spouses or former spouses as a direct result of a relationship breakdown, Subdivision 126-A of the ITAA 1997 provides automatic rollover relief. The capital gain or loss that would normally arise on the transfer is disregarded entirely. This means the transferor pays no CGT at the time of the transfer — the tax consequences are deferred until the person receiving the asset eventually sells it.
The rollover is automatic — you do not need to elect it. It applies whenever there is a transfer of a CGT asset between spouses (or former spouses) that occurs because of a relationship breakdown, provided the transfer is made under a qualifying instrument: a Family Court order, a binding financial agreement (BFA) under sections 90B–90D of the Family Law Act 1975, a court-registered arbitral award, or an approved maintenance agreement. You do not need to be formally divorced — the key requirement is that the parties have separated with no reasonable likelihood of reconciliation.
The person receiving the asset inherits the transferor's cost base, reduced cost base, and acquisition date. This is a crucial point — the cost base is not reset to the current market value. Any main residence exemption days accrued by the transferor also carry over, and pre-CGT status (for assets acquired before 20 September 1985) is preserved. This calculator shows the inherited cost base, the deemed acquisition date, and the estimated capital gain when the receiving spouse eventually disposes of the asset.
When to use this calculator
- You are transferring (or receiving) a property, shares, or other CGT asset as part of a divorce or separation settlement
- You need to confirm that your transfer arrangement uses a qualifying instrument (court order, BFA, arbitral award, or maintenance agreement)
- You want to understand the inherited cost base of an asset received from a former spouse — particularly whether it is the original purchase price or the current market value
- You received a property from a relationship breakdown and want to estimate the CGT you will pay when you eventually sell
- You need to check whether pre-CGT status carries over for an asset your former spouse acquired before 20 September 1985
Key concepts
- Automatic rollover
- Under Subdivision 126-A, the rollover applies automatically to qualifying transfers — there is no election to make. The transferor's capital gain or loss is disregarded, and the transferee steps into the transferor's tax position (cost base, acquisition date, and any prior exemption entitlements).
- Qualifying instrument
- The transfer must be made under one of these: a Family Court or Federal Circuit Court order, a binding financial agreement (BFA) under sections 90B–90D of the Family Law Act, an arbitral award under the Family Law Act, an approved maintenance agreement, or a written agreement approved under a state or territory law relating to relationship breakdowns.
- Inherited cost base
- The transferee receives the transferor's original cost base — not the market value at the time of transfer. If your former spouse bought a property for $450,000 and it is worth $750,000 when transferred to you, your cost base is $450,000. Any conveyancing costs you pay (stamp duty, legal fees) can be added as an additional cost base element.
- Main residence days carry-over
- If the transferor used the property as their main residence, those days carry over to the transferee. When you eventually sell, you can count both the inherited main residence days and any days you yourself used the property as your main residence for the partial main residence exemption calculation.
Worked example — investment property transferred under a court order
James and Linda purchased an investment property in Adelaide in February 2016 for $480,000 (including stamp duty and legal costs in the cost base). They separated in 2023 and a Family Court order in June 2024 transferred the property to Linda. At the time of transfer, the property was valued at $640,000. Linda sold the property in March 2026 for $690,000.
At the time of transfer (June 2024):
| Step | Detail | Amount |
|---|---|---|
| Market value at transfer | $640,000 | |
| CGT on transfer | Subdivision 126-A rollover — disregarded | $0 |
| Linda's inherited cost base | James and Linda's original cost base | $480,000 |
| Deemed acquisition date | February 2016 (original purchase date) |
When Linda sells (March 2026):
| Step | Detail | Amount |
|---|---|---|
| Capital proceeds | Sale price | $690,000 |
| Cost base | Inherited cost base + $8,200 legal fees on sale | $488,200 |
| Capital gain | $690,000 − $488,200 | $201,800 |
| Holding period | Feb 2016 to Mar 2026 (10 years — inherited) | > 12 months |
| 50% CGT discount | −$100,900 | |
| Assessable gain | $100,900 |
Linda's cost base is the original $480,000 — not the $640,000 market value at the time of transfer. The $160,000 of growth that occurred during the marriage is included in her assessable gain. This is why the inherited cost base matters: the rollover defers the tax, it does not eliminate it. If the property had been their main residence, Linda could also claim the main residence exemption for the combined period both she and James lived in it.