Tax, ATO and CGT After Divorce in Australia

Updating the ATO After Your Divorce

Your marital status affects your tax obligations in ways that aren't always obvious. Once your divorce is finalised, you need to update the Australian Taxation Office through your myGov account — specifically your relationship status, your contact details (if your name or address has changed), and your bank account details for any refunds.

The ATO doesn't automatically know you're divorced. If you've changed your name, you'll need to update that through myGov as well, ideally after you've already updated your driver licence and other primary identification so the records align. If your former spouse was listed as an authorised contact on your tax affairs, remove that access immediately.

For your next tax return, you'll report as your current marital status on 30 June. If your divorce was finalised during the financial year, you'll report as "separated" or "divorced" as applicable. This can affect your eligibility for certain offsets, particularly the Medicare levy surcharge thresholds, private health insurance rebate tiers, and family tax benefit calculations through Services Australia.

CGT Marriage Breakdown Rollover

The big tax question after divorce is whether you'll owe capital gains tax when property transfers between you and your former spouse as part of the settlement. In most cases, the answer is no — not immediately.

Under Subdivision 126-A of the Income Tax Assessment Act 1997, a CGT marriage breakdown rollover applies automatically when a CGT asset (typically real property, shares, or managed fund units) transfers between spouses or former spouses because of a court order under the Family Law Act, consent orders, or a binding financial agreement.

The rollover means no capital gains tax event is triggered at the point of transfer. The transferee is treated as having acquired the asset on the same date and for the same cost base as the transferor originally did. In practical terms, the tax liability is deferred, not eliminated.

Here's what that means for the person receiving the asset: when they eventually sell the property, they'll calculate their capital gain using the original acquisition date and cost base — not the date they received it in the settlement. If the property has appreciated significantly since it was originally purchased, the eventual CGT bill could be substantial.

When CGT Rollover Doesn't Apply

The rollover only applies to transfers that occur as a consequence of a relationship breakdown and are formalised through one of the recognised legal instruments — court orders, consent orders, or a BFA. Informal transfers between former partners without a legal instrument backing them don't qualify, and you'd face an immediate CGT event.

Also watch out for investment properties that have been used to generate rental income. The property's cost base includes not just the purchase price but also capital improvements, less any depreciation deductions claimed. If your former partner was claiming depreciation on the property and you inherit it through the settlement, you inherit that reduced cost base too.

Transfer Duty and the Section 424 Exemption

In Queensland, the transfer of real property between former spouses is exempt from transfer duty (stamp duty) under Section 424 of the Duties Act 2001, provided the transfer is made to give effect to a court order or BFA. This exemption applies to residential and investment properties but not to commercial or industrial property.

The critical requirement is timing: your court orders or BFA must be finalised and sealed before the transfer instrument (Titles Queensland Form 1) is executed. If you transfer the property first and try to claim the exemption retrospectively, it won't be granted, and you may owe the full ad valorem duty.

Practical Steps

1. Update your relationship status and contact details through myGov
2. Remove your ex-spouse as an authorised contact on your ATO account
3. Keep records of all property settlement documents for your next tax return
4. If you're receiving a property through the settlement, note the original cost base for future CGT calculations
5. Ensure your consent orders or BFA are sealed before any property transfers are lodged

The Queensland After-Divorce Checklist includes the full ATO notification sequence alongside every other administrative update you need to make after your divorce is finalised.

See more Queensland guides →