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Expenditure incurred by a transferor arising from a marriage breakdown property settlement can be included in the first element of the transferee's cost base to the extent of the costs of transfer (conveyancing fees, stamp duty, etc).

The transferor's general legal costs of the marriage breakdown property settlement do not satisfy the cost base rules in Division 110 of the Income Tax Assessment Act 1997 (ITAA 1997).

The transferor's costs of transfer that satisfy the cost base rules in Division 110 of the ITAA 1997 must be apportioned on a reasonable basis over all CGT assets involved in the property settlement, namely, all CGT assets transferred and all CGT assets retained by the transferor.

Under subsection 126-5(5) of the ITAA 1997, if a CGT asset is transferred between spouses because of a court order under the Family Law Act 1975, the first element of the asset's cost base in the hands of the transferee is the asset's cost base in the hands of the transferor at the time the transferee acquired it. The first element of the asset's reduced cost base (if applicable) is calculated similarly.

We invite you to comment on this Draft Taxation Determination. We are allowing 4 weeks for comments before we finalise the Determination. If you want your comments considered, please provide them to us within this period. Comments by Date: 15 September 1999 Contact officer details have been removed following publication of the final ruling.