When a marriage ends, both parties face significant financial adjustments. Divorce settlements typically include property division, superannuation splitting, and spousal or child support arrangements. These decisions can have long-term effects on your wealth and financial goals.
The Family Law Act 1975 provides the legal framework for property division, but financial outcomes also depend on tax regulations and other financial laws. Failure to consider these aspects can lead to unexpected tax liabilities and reduced asset values.
Capital Gains Tax (CGT): Transferring property between spouses under a settlement can trigger CGT, but roll-over relief may apply if transfers are court-ordered.
Stamp Duty Exemptions: In most cases, transfers of property as part of a family law settlement are exempt from stamp duty, but conditions apply.
Tax on Asset Sales: If you decide to sell property or investments post-divorce, CGT obligations will arise, which can significantly reduce your share.
Updated Rules for Investment Portfolios: Recent tax law changes affect how investment income is assessed post-separation, particularly if assets are transferred into a trust or self-managed super fund (SMSF).
Pro Tip: Always consult a tax professional before finalising property settlements to avoid hidden tax burdens.
Superannuation Splitting & Retirement Planning
Superannuation is often one of the largest assets in a relationship. Under Australian family law, superannuation can be split as part of a divorce settlement. This process involves:
Valuing superannuation accounts according to prescribed methods.
Splitting arrangements that transfer a portion of one partner’s super to the other.
Impact on retirement planning—dividing super may delay retirement for one or both parties.
With the 2025 financial regulations, the reporting requirements for SMSFs and contribution caps have changed, so getting advice on compliance is crucial.
Child Support & Spousal Maintenance
Following separation, financial responsibilities may include child support and spousal maintenance. These obligations are designed to ensure that children and the lower-earning spouse maintain an appropriate standard of living.
Child Support: Administered by Services Australia, child support is calculated based on both parents’ income and care arrangements.
Spousal Maintenance: This is not automatic; it depends on one partner’s need and the other’s capacity to pay.
Tax Treatment: Child support is not taxable, but spousal maintenance may have implications for income tax.
Tips for Managing Post-Divorce Finances
Managing finances after divorce requires careful planning. Here are essential steps:
Engage a Financial Adviser: Professionals can help you restructure investments, plan for retirement, and ensure tax compliance.
Update Legal Documents: Revise your will, superannuation beneficiaries, and insurance policies.
Build a New Budget: Adjust to single-income living and prioritise savings.
Review Debt Obligations: Ensure all joint loans are settled or refinanced to avoid future liability.
Divorce can dramatically alter your financial future, but understanding the legal and tax implications can help you make informed decisions. The 2025 updates to Financial Services and Tax Law make it more important than ever to seek professional advice.
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