Tax Tip 371: CGT on Changes in Ownership between Spouses

Whenever changing the ownership of property you will need to consider the CGT implications. Generally, CGT will only apply to the portion of the property transferred – unless an exemption applies. Where a property is the main residence, the CGT exemption may apply, but not always. I have seen a few cases where spouses have transferred property between themselves not knowing that this in itself would trigger CGT.


Example

Homer owns a property and later Homer and Marge move in. Marge wants to become an owner of the property since she is paying the loan on it.

They will transfer 50% to Marge.

This will trigger CGT for Homer on the 50% of the property transferred as it is a disposal.

If Homer bought it for $500,000 and it is worth $800,000 now then 50% is being transferred with a cost base of $250,000 and market value of $400,000 which is 50% of the cost base and the value (plus other costs would be added to the cost base.)

They assume it is CGT free as it is their main residence. But the exemption cannot apply in full if Homer had previously rented out the property.

 

Its a CGT event. The issue is whether its exempt, or not. And just because its a PPOR at the time of transfer doesnt eman the past is 100% exempt.

The major trap is the "revised" Victorian duty exemption. It only allows duty free spouse transfers without consideration ie a gift. The value of the gift is market value for CGT but the dutiable value is exempt.