When you’re going through a divorce or relationship breakdown, the focus is understandably on legal agreements, fairness, and emotional closure. But in the background, the ATO is still watching — especially when property or other major assets are changing hands.
And often, the tax consequences don’t hit until years later.
In most situations, transferring a property or shares would trigger capital gains tax (CGT). But in the case of a divorce or de facto relationship breakdown, the tax law provides something called “roll-over relief.”
In short: the person giving up the asset doesn’t pay CGT at the time of the transfer. Instead, the person receiving it effectively takes over the original ownership history and cost base — and will deal with the CGT when they eventually sell.
On the surface, this seems simple. But the reality is far from it.
First, not every asset transfer qualifies for roll-over relief. It only applies if the transfer is made under a court order or a formal financial agreement. If you and your ex-partner agree privately to move things around — even if it’s amicable — you could end up with a surprise tax bill right away.
Second, the relief only applies when the asset is transferred directly to a former spouse or partner. You can’t move property into a family trust or company (with some very limited exceptions) and expect the same treatment.
Third, the way the asset is used matters. If you receive an investment property as part of the settlement and then move into it, you don’t automatically get full CGT exemption when you sell. Only part of the gain may be exempt — based on how long you lived in it versus how long it was an investment.
And if you’re transferring shares or property from a business entity — like a company you own — the tax picture gets even more complicated. The company’s value may need to be adjusted, and that can affect distributions, retained earnings, and even future restructures.
One final point: the ATO can challenge arrangements that don’t seem genuine. In rare cases, roll-over relief has been denied where the separation appeared to be more about asset protection than an actual relationship breakdown.
Tax is rarely the focus during a separation — understandably so. But if you don’t consider the long-term tax implications of what you’re walking away with, you may find yourself carrying a liability you didn’t plan for.
The CGT doesn’t go away. It just follows the asset.
If you’re receiving an investment property, shares, or business assets, it’s worth taking a pause and getting proper advice before the settlement is finalised. In some cases, future tax can be accounted for in the negotiations — but only if you know it exists.
At Verity Advisory, we work with professionals and business owners who are dealing with more than just a tax return. When life changes — through divorce, inheritance, a business sale, or major investment decisions — our role is to step in with clarity and structure.
Our Discovery Session is a private, practical session designed to help you understand:
If you're going through a separation or know someone who is, reach out and book a talk with an adviser. The decisions you make now can shape your financial future — and we’re here to help you make them with your eyes open.
