Dividing the assets of a relationship - In brief
It is important to obtain a valuation for large assets and to bear in mind any future liability which may attach to them. For the division of smaller assets, it is generally better to agree on a division with your ex-partner whenever possible, avoiding the expense of litigation and professional valuation.
Larger assets of the marriage - obtaining a valuation
It is important when dividing large assets of a relationship that you obtain a valuation of the assets. If the assets are a property or a business, your estimate of the value could be completely wrong. In the case of superannuation, the true value of the superannuation may be different to what is reflected on the most recent superannuation statement, particularly if you or your partner are members of a defined benefits scheme.
Avoidance of stamp duty and other taxes, costs and fees
It is important to remember that on the transfer of an asset between parties to a marriage or a de facto relationship, it is not necessary to pay stamp duty on the transfer. This can sometimes mean a significant saving to the person acquiring the asset. There is also the saving of the sale costs and real estate commission fees on the sale of a property for the person transferring the asset.
Not only do parties save on stamp duty and sale and real estate commission costs, but there is also a rollover relief in relation to capital gains tax. This means if you transfer a business or investment property or paintings or shares that have a value and could attract capital gains tax to each other, there will be no payment of the capital gains tax on that transfer.
Future liability attached to particular assets
It is important to be aware of any liability or future liability that may attach to a particular asset. For example, even though capital gains tax is not payable on the transfer between parties to a marriage, when the person who retains the asset sells it in the future, there will be capital gains tax payable. Therefore there are occasions when the capital gains tax should be calculated as at the date of settlement and the person transferring the asset makes some contribution from their part of the asset pool to the other person. This will depend on whether or not it is the intention of the person who is retaining the asset to sell it at some future date.
Ultimately when considering how to divide large assets of a marriage, both parties should be mindful of how their futures will be impacted by that division. There are situations where one or both parties has an emotional attachment to a particular asset. For example, it is not always sensible to retain a large matrimonial home, if you cannot afford the upkeep, have no funds coming in and no superannuation to support yourself in the future. Sometimes it is better to sell an asset, crystallise and pay the debt attached to the asset and then agree to a property settlement which provides for a more balanced approach for the present and future.
Dividing the small and personal assets of the marriage
Litigation is expensive. It is better whenever possible to agree to the division of small and personal assets of the marriage. These assets will have a value and the value can be agreed by looking at comparable sales for similar items.
The two list method for dividing smaller assets
It is not uncommon for people to agree to an equal division of furniture, or if this is not possible, to have a two list method. A two list method operates by one party to the marriage preparing two lists which include all of the small and personal assets (usually furniture, household effects, garden tools etc) of the marriage. The asset lists must be of equal value and the person who does not draw up the lists gets to choose the list of items they wish to keep.
With personal items, anything to which you have a great emotional attachment should be placed in safekeeping if you are concerned that your former partner will damage or remove it. This does not mean that the value of an item will not be taken into account. However, it does ensure that it will be kept safe and in all likelihood you will retain it.
Value of assets at the date of settlement
For property settlement purposes, it is the market value at the date of settlement or hearing (not the date at separation) which is the value of the asset. It is not the insurance value or the purchase value. If a second-hand furniture or car dealer was to purchase your furniture or car, how much would they give you for it? That is the value of the asset for property settlement purposes.
Remember such things as jewellery, paintings and artefacts may have a substantial value. If it is the case that you own a large Burmese sapphire which has been handed down for generations or a Brett Whitely original, then these should be valued and the value included in the property pool. If it is agreed that you will keep the asset, its value will be on your side of the ledger.
Try to reach an agreement if at all possible
If you are unable to agree upon the division of smaller and personal assets, the court will make a decision. If the matter proceeds to court, the court will require a single expert to be appointed to value the assets. If a valuer is called in they will charge a fee to value your personal and smaller items. This fee will usually be quite substantial and in some cases is actually greater than the value of the items being valued. For this reason, try as much as possible to agree to the division of your small and personal items.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.