Divid­ing the larg­er and small­er assets of the mar­riage or rela­tion­ship after divorce or break-up

In Brief — Divid­ing the assets of a relationship

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.

Swaab Attor­neys holds a free pub­lic sem­i­nar on fam­i­ly law and divorce each Wednes­day in the Syd­ney CBD. Num­bers a lim­it­ed and book­ings are essen­tial. Please click here to reg­is­ter for our free divorce seminar.

For fur­ther infor­ma­tion please contact: