Provides partial relief for acquired property due to The relief for relationship persons who did not have an relationship breakdown and property is narrower than that intention of resale did not have an intention of for inheritance. resale. However for a relationship property settlement the parties have more choice about whether they receive the property. In addition the property was likely to have been obtained during the relationship so they will likely have intended to acquire the property Bright-line test would not More exceptions mean Not recommended apply in circumstance where are more complex, and Full rollover person only acquired property difficult to enforce. relief with due to a relationship subsequent breakdown and did not have exemption an intention of resale Losses Options Advantages Disadvantages Recommendations No economic distortions Significant revenue risk as Not recommended people will accelerate allow unrealised losses and defer Revenue risk significant losses unrealised gains Reduces revenue risk Creates an economic Recommended distortion where people losses without offsetable gains will Revenue risk mitigated Note that from Ring-fence under-value risky investments property sales that are also losses arising taxable under the current land solely under sale rules (ie, that are not the solely taxable under the test bright-line test) will not be ring-fenced, thereby mitigating any distortions. Reduces revenue risk Creates potentially unfair Not recommended asymmetry taxpayers have – to declare intention of resale Revenue risk is better Revenue for loss, but gains are taxed addressed with ring-fencing account regardless of declaration as this creates less asymmetry declaration and potential unfairness Would complicate the tax system The bright-line test creates a particular revenue risk. People can ensure that their losses are realised while any gains are. The analysis below considers the most appropriate treatment of losses under the bright-line test to address this risk. Land-rich companies and trusts
Provides partial relief for persons who did not have an intention of resale acquired property due to relationship breakdown and did not have an intention of resale. The relief for relationship property is narrower than that for inheritance. However for a relationship property settlement the parties have more choice about whether they receive the property. In addition the property was likely to have been obtained during the relationship so they will likely have intended to acquire the property Full rollover relief with subsequent exemption Bright-line test would not apply in circumstance where person only acquired property due to a relationship breakdown and did not have an intention of resale More exceptions mean are more complex, and difficult to enforce. Not recommended Losses The bright-line test creates a particular revenue risk. People can ensure that their losses are realised while any gains are. The analysis below considers the most appropriate treatment of losses under the bright-line test to address this risk. Options Advantages Disadvantages Recommendations allow losses No economic distortions Significant revenue risk as people will accelerate unrealised losses and defer unrealised gains Not recommended Revenue risk significant Ring-fence losses arising solely under the test Reduces revenue risk Note that losses from property sales that are also taxable under the current land sale rules (ie, that are not solely taxable under the bright-line test) will not be ring-fenced, thereby mitigating any distortions. Creates an economic distortion where people without offsetable gains will under-value risky investments Recommended Revenue risk mitigated Revenue account declaration Reduces revenue risk Creates potentially unfair asymmetry – taxpayers have to declare intention of resale for loss, but gains are taxed regardless of declaration Would complicate the tax system Not recommended Revenue risk is better addressed with ring-fencing as this creates less asymmetry and potential unfairness Land-rich companies and trusts