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    Successful CGT rollover on divorce


    In brief:    In a complex case, contested both by the Commissioner of Taxation and the wife of the taxpayer who controlled the transferor trust, the taxpayer has successfully obtained a declaration in the Federal Court that CGT rollover relief under Subdivision 126-A applied. The Family Court order was for the transfer of shares in a listed public company to the wife, although they were actually transferred to the trustee of a trust at the wife’s direction. It was held that rollover relief applied to the change in beneficial ownership in favour of the wife at the time the Court orders were made. In any case, the Court would have held that a rollover under s 126-15 applied for a trust to trust transfer given that the wife was sufficiently ‘involved’.

    More:    The Court’s comments about CGT rollover on divorce applying on a trust to trust transfer is controversial – it has been commonly understood that the rollover only applied for spouse to spouse transfers or those from companies and trusts to a spouse. Also, the Court was prepared to hold that a change of beneficial ownership (without transfer of the legal title) constituted a CGT event A1. In any case, an appeal by the Commissioner (and presumably the wife) seems likely. The company shares which were the subject of the Family Court’s order appear to have had a value of approximately $20M so presumably a substantial tax liability is at stake. This case (which also included complex trusts law and other legal points) illustrates the need for deep analysis and consideration of the tax issues involved in divorce and other relationship breakdowns – whatever the ultimate outcome of an appeal, one or other of the husband and wife in this case will no doubt be bitterly disappointed. (Sandini Pty Ltd v FC of T [2017] FCA 287)



    06 Apr 2017

    Topic: CGT/Trusts

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