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Re: Divorce settlement - funds from overseas

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I am separated from my ex husband and he is now living overseas. We  are separated by not yet divorced but we do have a binding financial agreement in place. I am due to receive a large lump sum payment next month as part of this financial agreement which I intent to put towards a home for me and the children. It is my understanding that there is no tax payable by me on this money, only on any interest earned while this money is in my bank account. Is this correct? Thank you for any advice.

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Hi @smyth5

 

Thanks for getting in touch!

 

@Larndawn is correct - lump sum divorce settlement payments do not have the characteristics of ordinary income. While the payment could be expected and relied upon, the payment is not earned and does not have any element of periodicity, recurrence or regularity. In addition, no capital gains tax liability arises for the ending of spouses’ rights that directly relate to the breakdown of their marriage or relationship, including if they receive cash as part of a divorce settlement, provided the spouses separate and there is no reasonable likelihood of cohabitation being resumed. There is also special tax treatment for disposal of assets as a result of marriage breakdown.  

 

Thanks, JodieH. 

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I'm new

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Hi Smyth5,

I found this on ato.gov.au:

https://www.ato.gov.au/individuals/income-and-deductions/income-you-must-declare/amounts-not-include...

 

Generally, you don't have to declare:

  • rewards or gifts received on special occasions, such as cash birthday presents and gifts from relatives given out of love (however, gifts may be taxable if you receive them as part of a business-like activity or in relation to your income-earning activities as an employee or contractor)
  • prizes you won in ordinary lotteries, such as lotto draws and raffles
  • prizes you won in game shows, unless you regularly receive appearance fees or game-show winnings
  • child support and spouse maintenance payments you receive.

Hope this helps

Highlighted

Best answer

ATO Certified

Community Support

Replies 0

Hi @smyth5

 

Thanks for getting in touch!

 

@Larndawn is correct - lump sum divorce settlement payments do not have the characteristics of ordinary income. While the payment could be expected and relied upon, the payment is not earned and does not have any element of periodicity, recurrence or regularity. In addition, no capital gains tax liability arises for the ending of spouses’ rights that directly relate to the breakdown of their marriage or relationship, including if they receive cash as part of a divorce settlement, provided the spouses separate and there is no reasonable likelihood of cohabitation being resumed. There is also special tax treatment for disposal of assets as a result of marriage breakdown.  

 

Thanks, JodieH.