When a relationship ends, the focus is naturally on a fair division of the “asset pool.” However, what many parties—and even some legal practitioners—overlook is that a $1 million investment property is not equal to $1 million in cash. Without expert tax analysis, one party may unknowingly inherit a “latent” tax bill that significantly reduces their actual settlement value.

The True Cost of “Latent” Tax

In Australian family law, assets are often “impregnated” with future tax obligations. If you receive an asset that has grown in value, you also inherit its tax history.

• Capital Gains Tax (CGT) Rollover: While the tax law “relationship breakdown rollover” allows you to transfer assets without paying tax today, the recipient “steps into the shoes” of the transferor. This means you take on the original cost base and will pay the full tax on the entire growth when you eventually sell.
• The Main Residence Trap: Even the family home isn’t always exempt. If the property was ever used for business or as a rental, a partial CGT liability may apply.

Complex Structures: Companies and Trusts

For high-net-worth separations involving private companies, Division 7A is a critical risk. Payments or property transfers from a company to a spouse can be “deemed” as unfranked dividends, potentially taxed at the highest marginal rate unless structured correctly under a formal Section 109RB court order.

How We Protect Your Settlement

As an independent tax advisor, I work alongside your family lawyer to ensure the “net” value of your settlement is truly equitable. My role includes:

1. Forensic Asset Review: Identifying the tax “DNA” of every asset in the pool.
2. Tax-Effective Structuring: Recommending divisions that utilise CGT rollovers and stamp duty exemptions effectively.
3. Expert Reports: Providing the court or mediators with a clear calculation of future tax liabilities to justify percentage adjustments in your favour.

Secure your financial future before you sign.
Contact us today for a confidential consultation on your matrimonial tax strategy.