Capital Gains Tax (CGT)and Family Law

Property Settlements

November, 2016By Matthew Carney, Family Lawyer

Legal DisclaimerThis presentation is offered for general information

purposes only. It does not constitute specific legal

advice or opinion. You should not act or rely upon any

of the information contained within this seminar

without seeking the advice of a qualified solicitor who

specialises in the particular area of expertise and

jurisdiction that you require.

IntroductionIf you separate and you are considering retaining assets that if sold would result in a Capital Gains Taxation ("CGT") liability or if you are selling an asset at the time of property settlement that would result in a CGT liability you need specialised family law advice.

The Court’s ApproachThe proper approach to be adopted by a Court in family law proceedings in relation to the effect of potential CGT is noted on the following slides…

The Court’s Approach - 11. Whether CGT should be taken into account in valuing a particular asset varies according to the circumstances of the case, including…

The Court’s Approach - 1 the method of valuation applied to the particular

asset;

the likelihood or otherwise of that asset being realised in the foreseeable future; and

the circumstances of its acquisition and the evidence of the parties as to their intentions in relation to that asset.

The Court’s Approach - 22. If the Court orders the sale of an asset, or is satisfied that a sale of it is inevitable, or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then, generally, allowance should be made for any CGT payable upon such a sale in determining the value of that asset for the purpose of the proceedings.

The Court’s Approach - 33. If none of the circumstances referred to in ‘2’ applies to a particular asset, but the Court is satisfied that there is a significant risk that the asset will have to be sold in the short to mid-term, then the Court, whilst not making allowance for the CGT payable on such a sale in determining the value of the asset, may take that risk into account as a relevant future factor…

The Court’s Approach - 3… the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.

Special CircumstancesThere may be special circumstances in a particular case which, despite the absence of any certainty or even likelihood of a sale of an asset in the foreseeable future, make it appropriate to take CGT into account in valuing that asset.

Special CircumstancesIn such a case, it may be appropriate to take the capital gains tax into account at its full rate, or at some discounted rate, having regard to the degree of risk of a sale occurring and/or the length of time which is likely to elapse before that occurs.

Your Lawyer & AccountantAs family lawyers, we are not qualified to provide you with taxation advice.

We are, however, required to understand the potential tax consequences of property settlements as taxation issues often arise during property settlements which should cause you to also seek input from your accountant before finalising a settlement.

Your Lawyer & AccountantIn summary, it is extremely important that you have a specialised family lawyer who can identify these taxation issues and work with you and your accountant to achieve you the most tax effective and beneficial outcome for you from your property settlement.

Turnbull Hill Lawyers – Contact UsIf you have any further questions relating to Capital Gains Tax (CGT) and property settlements, or you'd like to discuss a related matter, please call:Matthew Carney on 1800 994 279 or email him.

He will endeavour to respond to your enquiry within 24 hours.

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