Tax implications are sometimes overlooked in family law settlements, which can be costly for clients. Our eyes may glaze over when we hear the words ‘tax law’, however, it is important to have at least a basic understanding of the tax implications in a property settlement, so as to ensure the best net outcome for your client.
The most common taxes in family law settlements relate to:
- Capital Gains Tax (CGT)
- Income Tax
- Stamp Duty
- Goods and Services Tax (GST)
However, CGT and income tax will be the most common issues and will have the greatest impact as assets are transferred between parties. which may attract CGT.
Some of the GST issues that need to be considered and have an understanding of, are as follows:
- What are the general rules?
- What are the exemptions (general and specific)?
- What are the common transactions that give rise to tax or CGT?
- What is CGT rollover relief and how does it apply?
- How does CGT apply in asset transfers from a company or a trust?
- Does transfer of the main residence attract CGT, if not, when does CGT arise?
- How does CGT apply in transference of superannuation interests?
- What is the effect of CGT in family trust issues?
Having a checklist which contains the above eight topics (in point form), which includes relevant law (Income Tax Assessment Act 1936 (Cth) and Income Tax Assessment Act 1997 (Cth) and Family Law Act 1975 (Cth)) with relevant cases and include Australian Taxation Office Rulings, applicable to Family Law. These will assist to understand the tax implications and bolster confidence when advising in family law property proceedings.
Do not hesitate to seek expert tax advice when necessary.
If you would like more helpful hints, subscribe to my blog on www.sydneybarrister.net.au or call me at Elizabeth Street Chambers on (02) 9336 5399