Capital Gains Tax and Divorce in Australia

🔄 The relationship breakdown CGT rollover🔗

🎯 The essential: When assets transfer between separating spouses because of a court order or a binding financial agreement made under the Family Law Act 1975, the CGT relationship breakdown rollover means no CGT is triggered at the time of transfer.

This applies to both married and de facto couples, and it covers a wide range of assets, including property and shares. The transfer itself is not a taxable event. The tax is deferred to a later point, when the receiving spouse eventually sells the asset. The ATO's page on relationship breakdown and CGT sets out the full conditions, and these rules are subject to change, so check the ATO or a registered tax agent for the latest position.

⏳ It defers CGT, it does not erase it🔗

This is the most important thing to understand. The receiving spouse inherits the original cost base of the transferring spouse, not the market value at the time of settlement. The original purchase price. Here is a simple example to make that concrete.

• Partner A bought shares for $10,000 in 2015.
• By the settlement in 2025, those shares are worth $30,000.
• Under a court order, Partner A transfers the shares to Partner B. No CGT is triggered at transfer.
• Partner B's cost base is $10,000, what Partner A originally paid in 2015.
• In 2026, Partner B sells for $40,000. The capital gain is $30,000 ($40,000 minus $10,000). Because the shares were held for more than 12 months from the original 2015 purchase, the 50% CGT discount may apply.

🏠 The family home and CGT🔗

For most separating couples the family home is the biggest asset on the table. The good news is that it is generally covered by the main residence exemption, which means no CGT when it is sold. There are two traps worth flagging.

Trap one: if one spouse keeps the family home and the other takes an investment property as part of the settlement, the investment property does not get the main residence exemption when it is eventually sold. The spouse who ends up with it will face CGT on any gain, calculated from the original cost base. Two assets of similar market value can carry very different tax consequences.

Trap two: if the family home was used partly for income, for example renting out a room or running a business from a home office, the main residence exemption may only be partial. The proportion used for income-producing purposes may be subject to CGT. The rules here are genuinely complex, so check the ATO's page and speak to a registered tax agent before making decisions.

📊 Investment properties and shares in a settlement🔗

The rollover applies to investment properties and shares transferred under a court order or binding financial agreement. No CGT is triggered at the time of transfer, and the receiving spouse inherits the original cost base. A practical point that often gets overlooked: keep all original purchase records. Contracts of sale, brokerage statements, records of any capital improvements, all of it. The receiving spouse will need that paperwork when they eventually sell, because the CGT calculation goes back to the original purchase date, not the settlement transfer date.

The 50% CGT discount for assets held more than 12 months is also calculated from the original purchase date. So if Partner A bought an investment property in 2018 and transfers it to Partner B in 2025, Partner B already satisfies the 12-month holding requirement from day one. That is a meaningful benefit, and one worth understanding before deciding which assets to take.

🏦 What about superannuation?🔗

Super splitting in a relationship breakdown is generally not a CGT event. When super is split by agreement or court order, it is treated as a rollover within the superannuation system, not as a disposal of an asset for CGT purposes. Super is taxed under its own rules when it is eventually withdrawn, which are separate from the CGT rules that apply to property and shares. Our guide on superannuation splitting in divorce covers how super interests can be split.

🧩 Why the structure of your settlement matters🔗

This is where settlement planning becomes genuinely important. Two assets with the same market value today can have very different CGT consequences, depending on their cost base. Consider this comparison.

Same market value, very different future tax bills for whoever ends up with each asset. This is why the structure of your settlement matters so much. Agreeing to split assets "50/50 by value" without factoring in the cost base of each asset can leave one spouse with a significantly larger future tax liability than the other.

You need two professionals involved before you sign anything: a family lawyer to structure the legal agreement correctly under the Family Law Act 1975, and a registered tax agent to model the CGT consequences of different split options. If you are still weighing your position, our guide on protecting your assets legally before separation and the true cost of divorce are worth reading alongside this.

🧑‍💼 Get the right help🔗

This article is general information only. It is not personal tax or legal advice. For your specific situation, speak to a registered tax agent (search the Tax Practitioners Board register) who can model the CGT consequences of your settlement options, a family lawyer who structures the legal agreement, and check the ATO's relationship breakdown and CGT page, which is the authoritative source and is subject to change. Getting the right advice upfront costs far less than fixing a poorly structured settlement later.

❓ Frequently asked questions🔗