Navigating property settlements after separation: EOFY considerations

The end of the financial year is a significant time for many aspects of financial planning, and property settlements after separation are no exception. Understanding the implications of this period can help ensure that family law settlements are fair and equitable, taking into account the valuation of businesses, the payment of CGT, and Division 7A obligations. 

Valuation issues  

When a business or trust is part of the asset pool in a family law property settlement, the valuation date can be crucial. The end of the financial year provides a natural point for assessing the business’s financial health. Financial statements and tax returns for the most recent financial year offer an up-to-date picture of the business’s value. This can be particularly important if the business’s performance has fluctuated significantly over the year. While it is possible to obtain a valuation using quarterly figures, it is optimal for the valuation to be based on finalized accounts that take into consideration the full financial performance of the business after tax returns are completed. 

In such circumstances, it may be beneficial to await the preparation of the most recent financial statements and tax returns. This will provide a more accurate assessment of the entity’s financial position. 

Payment of Capital Gains Tax 

Under the Family Law Act 1975, in the context of a separation where parties transfer assets (such as shares or property) as part of a property settlement, this can be treated as a CGT event. 

Rollover relief may apply if the transfer is pursuant to a court order or Financial Agreement and between spouses or defacto partners. Rollover relief defers the liability until a later time when the asset is sold.

Where rollover relief does not apply CGT is triggered at the time of the asset transfer and tax will then be assessed in that financial year.  Knowing this before 30 June can allow you to better plan for the payment of your taxation liability.

At the end of the financial year CGT events must be recorded, even when rollover relief applies.  This is crucial for future CGT calculations and transparency if the asset is subsequently sold.

CGT is calculated on the market value of the asset at the time of the transfer, and if that occurs close to 30 June, then valuation date impacts which financial year the CGT event is recorded in.

In a family law property settlement, if CGT is not immediately payable it may be necessary to document in the agreement provisions for the future payment of tax, including the attendance upon an agreed tax expert to calculate the CGT, for the estimated CGT to be set aside, and to provide for the payment of any shortfall or overpayment between the parties.

Division 7A obligations 

Division 7A of the Income Tax Assessment Act deals with loans and payments made by private companies to their shareholders or associates. These obligations can impact property settlements, particularly when a family business is involved. At the end of the financial year, any Division 7A loans or trust distributions must be considered, as they can affect the overall asset pool. Ensuring that these obligations are accounted for can prevent unexpected tax liabilities and ensure a fair division of assets. 

Further amendments to the Family Law Act 

This year, family lawyers have “new” legislation to consider which may significantly impact the advice provided to separating couples regarding property settlement considerations.  The Family Law Amendment Act 2024, which came into effect on 10 June 2025, includes the following factors which the Court must consider when determining property settlements, specifically with regard to contributions made by a partner during the relationship: 

• the effect of any family violence, to which one party has subjected the other party, on the ability of a party to make contributions; and 

• the effect of any economic or financial abuse to which a party has been subjected by the other party; and 

• the effect of any material wastage, intentionally or recklessly of property or financial resources of either of the parties or both of them; and 

• any liabilities incurred by either of the parties including the nature of the liabilities and the circumstances relating to them; and

• the extent to which either party has the care of a child of the marriage who has not attained the age of 18 years, including the need of either party to provide appropriate housing for such a child. 

These changes apply to all new and existing property cases, except where the final hearing has already begun.   

These amendments potentially have significant implications for the valuation of businesses and the treatment of tax in property settlements after separation. Under these amendments, the Court must now consider factors such as family violence, economic or financial abuse, and material wastage.  These considerations can directly impact the valuation of a business, as they may affect the business’s financial health and stability. For example, if one party has subjected the other to economic abuse, this could have led to mismanagement or depletion of business assets, thereby affecting its valuation. The new amendments also require the Court to consider any liabilities incurred by either party, including Division 7A obligations, which can further complicate the tax treatment in property settlements.  

Summary  

The end of the financial year brings several considerations for property settlements after separation, particularly in 2025. It is essential that you seek professional advice to navigate these complexities and achieve the best possible outcome. 

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