Breaking up is hard. And when a house or land is involved, it can feel even trickier.
If you’re thinking about selling your property before you’ve sorted everything out in your divorce, there’s some stuff you need to know.
This isn’t just about making money or finding a new place to live. It’s about understanding the rules in Australia so you don’t get into more trouble. Let’s break it down in simple words.
Can I Sell My Property Before the Divorce Settlement is Finalised?
Yes, you can sell your property before your divorce is finalised. But there are some tricky parts to consider. Selling a property in divorce that is jointly owned by both of you can make things more complicated.
Sometimes, both people agree to sell and share the money easily. Other times, selling can cause more arguments or make things worse.
Selling the property might also change how the divorce agreement looks in the end.
Because of all this, it’s really important to think hard, learn about the rules, and look at the good and bad sides before making a final choice.
Spouse’s Permission
If the property is jointly owned, then yes, you generally need your spouse’s consent.
Selling assets before divorce without mutual agreement might lead to legal complications.
Furthermore, removing items from the marital home before divorce without consent can be viewed as an attempt to hide or devalue assets, which can be detrimental during settlement negotiations.
Also read: Can My Girlfriend Take Half my House in Australia?
What is the Family Law Act, and How Does it Affect Property Sales During Divorce?
The Family Law Act governs family-related matters in Australia, including divorce and property settlements.
When selling marital property before divorce, the act mandates that both parties disclose all assets, incomes, and financial resources.
This ensures that disposing of assets before divorce doesn’t unfairly disadvantage one party. For more specifics, refer to the Family Law Rules 2004 – RULE 13.01 General duty of disclosure.
Are There Tax Implications for Selling Property Before a Divorce Settlement?
Absolutely, the decision to sell the property before finalising a divorce settlement can introduce a range of tax implications that both parties should be aware of, the most important one is the Capital Gains Tax or CGT.
Capital Gains Tax (CGT) Implications
When you sell a property, you’re often subject to CGT on any capital gain you make, which is the difference between the property’s selling price and its cost base (the original purchase price plus associated expenses). This gain is typically included in your income tax return and can significantly impact your tax liability for that financial year.
Main Residence Exemption
Australia offers a main residence exemption for properties that have been the owner’s primary residence. If the property sold was your primary home, you might not have to pay CGT. However, there are conditions. For instance, the exemption generally applies if the property has been your primary residence from purchase until sale. It could affect the exemption if you rented out any part of it or used it to generate income.
Also read: How To Avoid Capital Gains Tax In Divorce
Changes in Tax Situation Due to Marital Status
The tax situation can become more complicated if one partner moves out. For example, if one spouse remains in the home while the other moves out, and then the property is rented out, this can change the property’s status from a primary residence to an income-generating asset, impacting the main residence exemption.
Joint Ownership
If the property is jointly owned, both parties must report their share of the capital gain or loss in their tax returns. Having clear records of property-related expenses is important, as these can affect the property’s cost base and, subsequently, the CGT calculations.
Temporary Absence Rule
Move out of your main residence, and don’t claim any other property as your primary residence. You might still be able to treat the property as your primary residence for up to six years if you rent it out or indefinitely if you don’t generate income from it. This can offer relief from CGT under certain conditions.
How Can Selling the Property Impact the Overall Divorce Settlement?
Selling property can impact the financial landscape of a divorce settlement. Profits or losses from the sale are usually considered when dividing assets.
Additionally, selling assets before a divorce can be viewed with suspicion, especially if not done transparently or in good faith.
It can influence decisions on how other assets are divided and even affect spousal support determinations.
Should I Consult a Lawyer Before Deciding to Sell the Property?
Absolutely. Given the complexities of transferring assets before divorce and the potential consequences of such decisions, consulting a property settlement lawyer is crucial.
They can offer guidance tailored to your situation and ensure that you’re acting in your best interests and within the bounds of the law.
Selling Property Before Divorce Settlement Australia?
Ensure you make informed decisions. At Justice Family Lawyers, our expert team is committed to guiding you through every step, protecting your interests, and offering tailored solutions. Trust in our expertise. Contact Justice Family Lawyers today.
Principal of Justice Family Lawyers, Hayder specialises in complex parenting and property family law matters. He is based in Sydney and holds a Bachelor of Law and Bachelor of Communications from UTS.
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