Updated 10 October 2026
Transferring property between separating spouses under a court order or binding financial agreement does not trigger capital gains tax at the time of transfer. The rollover is automatic, but it does not erase the tax. The person keeping the property inherits the original cost base, and the CGT bill waits for them at the next sale.
At a glance
- Property transferred under a court order, consent orders or a binding financial agreement qualifies for an automatic CGT rollover
- The rollover defers the tax, it does not remove it. The recipient inherits the transferor's cost base and acquisition date
- Transfers done informally, without orders or a binding agreement, get no rollover and are taxed at market value on the day
- Settlement negotiations routinely need valuations at more than one date, including a retrospective value at separation
- A property kept after separation carries the other party's use history, which can affect the main residence exemption at sale
In this guide
How the marriage breakdown rollover works
When a CGT asset moves between spouses or former spouses because of a court order under the Family Law Act, court-approved consent orders, a binding financial agreement, or an arbitral award, Subdivision 126-A of the tax law applies a rollover automatically. Neither party can choose to opt out.
The transferor disregards any capital gain or loss on the transfer. Nothing is payable at settlement, which is what most people expect and is usually what happens.
The rollover also applies where property comes out of a company or trust to a spouse under the same kinds of orders, though the company side of that transaction has its own consequences and needs specific advice from your accountant.
What the rollover does not cover is just as important. It applies to transfers between the separating parties as individuals. Moving a property into a company or family trust as part of restructuring after separation is not covered, and neither is any transfer made without formal orders or a binding agreement in place. A transfer to a child after the settlement is outside the rollover entirely and runs on market value; our guide to gifting property to your children covers that position.
The catch: the cost base travels with the property
The rollover works by treating the recipient as if they had always owned the property. They inherit the transferor's cost base, and for property bought before 20 September 1985 the pre-CGT status carries over too.
This is the single most misunderstood point in family law tax. The transfer does not reset anything to market value.
Note
Worked exampleA couple bought an investment unit in 2014 for $400,000. Under consent orders in 2026, it is transferred entirely to one spouse when it is worth $780,000. No CGT is payable on the transfer. In 2029 that spouse sells for $860,000. Their gain is measured against the 2014 cost base of $400,000, not the $780,000 value when they received it. The entire $460,000 gain, less costs, lands on the person who kept the property.
Warning
Latent tax belongs in the negotiationTwo assets worth the same on paper are not worth the same after tax. A $780,000 investment unit carrying $460,000 of embedded gain is worth materially less in hand than $780,000 of cash or the family home. Courts can take future CGT into account when dividing assets, and so should any negotiated split. That starts with knowing the current market value and the likely gain, which is a valuation question before it is a legal one.
The dates a settlement actually needs valued
Family law matters routinely need property values at more than one date, and they are rarely all today.
| Date | Why it gets valued |
|---|---|
| Separation | The starting point for many negotiations, often one or more years back |
| Settlement or hearing | The balance sheet the orders are based on |
| Transfer | Duty and record keeping, and the market value substitution rule where no rollover applies |
| First income use | If the former home is kept and rented, the cost base resets at that date |
A retrospective valuation reconstructs value at the earlier dates from sales evidence that existed at the time. That evidence thins out as years pass, so the earlier the report is ordered, the stronger it is.
For the settlement itself, our family law valuation reports give both parties and their solicitors an independent figure to negotiate from, prepared by a valuer with no stake in the outcome.
Because the rollover defers the tax rather than removing it, the spouse who keeps the property will sell under whichever rules apply then. The CGT changes from 1 July 2027 reach every rolled-over property, and the capital gains tax calculator shows the effect of the reset on a property held across that date.
Dividing property in a settlement?
Independent valuations for family law settlements, prepared and signed by a Chartered Accountant and Certified Property Valuer. Residential $297, commercial $595, inc. GST, delivered in 24 to 48 hours.
Start your orderHow it worksNo orders, no rollover: the informal transfer trap
Some couples agree between themselves and simply transfer the title, without consent orders or a binding financial agreement. The tax result is sharply different.
Without the rollover, the transfer is an ordinary CGT event between related parties. Because it is not an arm's length sale, the market value substitution rule applies: the transferor is taxed as if they sold at full market value on the day, even if nothing changed hands. The CGT that the rollover would have deferred becomes payable now, and a market valuation at the transfer date is required to work out the bill.
Penalty risk
The worst of both worldsAn informal transfer can mean immediate CGT for the person giving the property up, calculated on a value they never received, plus transfer duty in most states. The duty exemptions that usually apply to family law transfers also generally require formal orders or a binding agreement. If a settlement is being done by handshake, both parties should see their solicitor before the title moves.
The former home after separation
The main residence exemption has its own wrinkle after a breakdown transfer. The recipient's exemption on the transferred interest looks through to how both parties used the property during the whole ownership period. If the home was rented out for a stretch before or after separation, part of the exemption can be lost, and the gain for the non-exempt period is worked out using market values at the relevant dates.
One spouse staying in the home while the other rents theirs out, years of the property producing income before settlement, or the home being kept and rented after the transfer all create valuation dates that matter years later. The main residence exemption rules do most of the work, but only if the values at those dates are documented while the evidence is fresh.
Superannuation is divided under its own splitting rules rather than the CGT rollover. Where the asset being split is property inside a self managed super fund, the fund needs its own market valuation, which is handled by our SMSF practice at SMSF Property Valuations.
Common questions
Does transferring property in a divorce trigger CGT?
Not when the transfer happens under a court order, consent orders or a binding financial agreement. The rollover applies automatically and defers the tax. Informal transfers without orders get no rollover and are taxed at market value.
Does the person receiving the property get a new cost base?
No. They inherit the transferor's cost base and acquisition date. The gain that built up during the marriage is taxed when the recipient eventually sells.
Do we need one valuation or two?
For negotiations, parties often start with a single independent figure. Where each side wants its own advice, separate reports work too. Contested hearings can require a court-appointed expert, which is a different engagement to a desktop settlement valuation.
What date should the valuation be at?
Most settlements need the current value. Many also need the value at separation, and some need the date a property first earned rent. Retrospective dates cost the same as current ones.
Is transfer duty payable on a family law transfer?
Most states and territories, including South Australia, exempt or concessionally treat transfers made under court orders or a binding financial agreement. Confirm the position with your conveyancer or solicitor before settlement.
