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A marriage or de facto split is often traumatic for all concerned and can be difficult where the parties are “at war” over the hard earned assets of the relationship . Going through courts can be both economically and emotionally crushing. If the parties reach a settlement then you might think that is the end of the matter and the stakeholders can feel complete relief. But that is not necessarily the case depending on the structure of the settlement. Notwithstanding that fact there is some good news on the revenue front Recently we had a property settlement case where the parties settled on the basis that some properties were transferred and others were to be sold. Different revenue outcomes resulted from a transfer as distinct from a sale. So what are the 5 tips and traps in this space?
- Generally speaking the transfer of assets between spouses to a marriage or de facto relationship such as the family home will be exempt from stamp duty.
- However there are only 6 CGT events where restructuring your affairs in a property settlement will result in relief or exemption from capital gains tax.
- If the parties agree to sell an asset such as a commercial property where the asset was purchased after 1985 then this can result in significant capital gains tax liabilities arising although there may be some relief and the general discount may apply.
- If for tax reasons a trust is declared as part of the overall arrangements in respect of an asset and say assets are transferred into that trust by one party then CGT Event E1 will rear it’s ugly head and tax will apply.
- Although there is CGT relief if a trust transfers assets to a party to a marriage in a settlement, the same benefit does not apply in the reverse position where a party transfers assets to a trust due to CGT Event A4.
Even if you reach the happy state where agreement has been achieved it is important you seek good advice about the duty and tax consequences of that agreement PBL regularly received instructions in property settlement matters and we are available to assist.
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