Income tax: capital gains: if marriage breakdown roll-over applies to a transfer of a CGT asset between spouses, what expenses of the transferor become the first element of the transferee's cost base of the asset under paragraph 126-5(5)(a) of the Income Tax Assessment Act 1997?

Costs of transfer (conveyancing fees, stamp duty, etc.) of a CGT asset transferred between spouses because of a court order under the Family Law Act 1975 are included in the cost base of the transferor (paragraph 110-25(3)(b)) which, by subsection 126-5(5), becomes the first element of the transferee's cost base.

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).

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.