Many couples separate on good terms. This is positive, especially when children are involved. Separation is still difficult, but cooperation can help both parties move forward.
Some ex-partners agree informally on how to divide property. However, failing to formalise a property settlement can create serious risks. This is especially true where assets, debts, or pre-existing wealth are involved.
Even where a couple separates amicably, it is important to seek legal advice. Formalising a financial settlement protects both parties and prevents future disputes. Below are key reasons why.
Stamp duty concessions
Transfers of real estate usually attract stamp duty. However, exemptions may apply when parties formalise their agreement through consent orders or a financial agreement under the Family Law Act 1975 (Cth).
These exemptions can result in significant savings. Informal agreements do not meet the legal requirements and will not qualify for concessions.
Taxation implications
Property settlements can have tax consequences. Capital gains tax (CGT) applies when an asset is sold or transferred for profit.
Transfers of a family home are usually exempt under the main residence rules. However, CGT may apply to investment properties, shares, and other assets.
Tax roll-over relief may apply where a settlement is formalised through a financial agreement or consent orders. This defers CGT until the asset is sold in the future.
Tax outcomes can significantly affect the value of a settlement. Parties should seek accounting advice alongside legal advice to avoid unexpected liabilities.
Claims on post-separation assets
Informal agreements do not legally finalise financial arrangements. Either party may still bring a claim after separation, even if an agreement exists in writing.
This creates risk for future assets, inheritances, and income. It may also cause issues if one party becomes bankrupt and property ownership has not been properly divided.
Joint debts and guarantees can also remain enforceable. Without formal documentation, one party may still be exposed to financial liability.
A properly drafted agreement or court order helps prevent future disputes and provides finality.
Finalising your property division
Once agreement is reached, parties can formalise it through a financial agreement or consent orders.
A financial agreement is a binding contract. Each party must receive independent legal advice. The agreement is enforceable if properly prepared.
Consent orders are approved by the Court. Parties do not usually need to attend Court for approval.
These options can cover:
• transfer or sale of property
• division of cash and assets
• superannuation splitting
• repayment of debts
• spousal maintenance
• closing joint accounts
Key considerations
Family lawyers generally support fair agreements between separating couples. However, they ensure both parties understand the legal and financial consequences.
Formal agreements protect against tax issues, duty complications, and future disputes. They also provide certainty and finality for both parties.
If you need advice, contact us on (03) 9422 5439 or email [email protected].