Capital Gains Tax Main Residence Exemption and Marriage Breakdown

Capital Gains On Assets Including Main Residence Due To Marriage Breakdown.

Automatic  rollover  relief applies in certain circumstances where assets are transferred between spouses due to a marriage breakdown.

Assets acquired before 20 September 1985

Where the asset was acquired before 20 September 1985 the spouse receiving the asset is treated as having acquired the asset before that date. A subsequent sale of that asset would not result in any capital gains liability, because its acquisition date is taken to be pre-20 September 1985.

Assets Acquired after 19 September 1985

The transferee spouse inherits the transferor's cost base or reduced cost base of the asset acquired. Costs of transfer  e.g.  legal fees & stamp duty become part of the cost base transferred.  However general legal costs of property settlement of the marriage breakdown do not form part of the cost base.

Main residence exemption

Effective from 12 December 2006, legislation ensures that where a main residence is transferred as a direct result of a marriage breakdown , the capital gains tax main residence exemption rules take into account the way in which both the transferor and transferee spouse used the dwelling when determining the transferee spouse's ability for the main residence exemption on a future disposal of the property.

Where a dwelling had been used  as a main residence from its acquisition and then first used for an income producing purpose after 20 August 1996 legislation applies that the transferee spouse is taken to have acquired the ownership interest in the dwelling for its market value at the time it is first used to produce income.