In a recent interview with The Australian, Gary Yan discusses how tax implications factor into property settlements during separation or divorce.

Property has historically been a prized asset in divorce settlements, but trying to keep hold of the marital home may no longer be the best financial strategy.

Tax impact

Future tax bills can play a key role in divorces, because while the family home is CGT-free, investment properties and holiday homes are not.

Coote Family Lawyers partner Gary Yan said the law did not take into account potential future tax liabilities – such as CGT – in calculating a settlement.

“In a separation if one party retains an investment property, if it is held jointly, the transferor gets rollover relief and the transferee – the party retaining it – would be responsible for any CGT payable upon sale if and when they sell it down the track,” he said.

“If neither party wishes to retain an investment property then it will be sold and the CGT and costs of sale will be taken into account in working out the net value for the purposes of calculating the parties’ settlement.

“We often refer clients to obtain tax and accounting advice as part of negotiating the settlement.”

Mr Yan said his firm regularly saw clients not seeking to keep the family home for emotional reasons, such as “wanting to move on and start afresh”.

He said divorcing couples should “try not to let your emotions get in the way”.

“This is easier said than done, but in most cases, adopting a commercially pragmatic approach to reach an early resolution of the financial issues is the best outcome.”

You can read the full article in The Australian here: Divorce dilemma: selling the family home may be a smart strategy as prices soar 

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