Hi Emerald,
When a property is transferred out of a trust to another party, (you in this case) there is a Captial Gains Tax (CGT) event. Where the property being transferred is your main residence however, the transaction will be exempt from CGT.
Factors that the ATO will look at when determining whether the property is your main residence is:
- the length of time you live there – there is no minimum time
- whether your family lives there
- whether you have moved your personal belongings into the home
- the address to which your mail is delivered
- your address on the electoral roll
- the connection of services (for example, phone, gas or electricity)
- your intention in occupying the dwelling.
In the context of a post divorce or separation property settlement, the transfer of the family home from one spouse to the other will not be affected by Capital Gains Tax, because of the main residence exemption.
If the property is transferred by orders by the Family Court or a Financial Agreement under the Family Law Act, the transfer is covered by ‘compulsory roll over relief’ under the Income Tax Assessment Act, such that CGT will not be payable immediately, but the property is carries the CGT liability which will be payable when the transferee ends up selling it.
If the property is held by the trustee of a family trust, they can in certain cases transfer the property to a spouse who is a beneficiary of the trust, via a Court Order or Financial Agreement which may be covered by the ‘rollover relief’ - postponing payment of CGT. There may also be an exemption from VIC stamp duty if the transferee was a beneficiary of the trust at the time the property was purchased and the property is located in Victoria.
Depending on your circumstances there are a variety of exceptions that may apply and you should really obtain advice from a tax lawyer or an appropriate financial consultant so that you know the best way to structure the settlement.
