Valuing & Splitting Real Estate,
Superannuation and Business Interests on Divorce
by Matthew Coates
The process for splitting assets on the breakdown of a relationship is quite clear cut. The method is divided into four steps and applies to all your assets including your house, superannuation and business.
The first step is to identify all your assets and liabilities and value them. This can be done by preparing a family balance sheet. You can value your:
- House – by obtaining market appraisals from two local real estate agents.
- Superannuation – by reviewing your most recent superannuation statement.
- Business – by asking your accountant to prepare a valuation letter applying standard business valuation principles. You then take off all your liabilities, such as your mortgage.
The second step is to look backwards at each party’s contributions over the history of the relationship, and assess those in percentage terms. This takes into account income earned, care for children, inheritances received, assets brought in at the start, homemaker duties and gifts from relatives. As an example, after a 20 year relationship where the parties started with nothing, had two children who are now over 18, one worked and one looked after the kids, you would expect their historical contributions to be 50% each.
The third step is to look forwards and assess each party’s future needs. Typically, this examines each party’s ability to earn an income, their health, their ages and the need to continue as a carer for minor children. An adjustment in this third step is often necessary because one party leaves the relationship with little or no earning capacity, having been out of the workforce for a long time to care for kids. If this adjustment is 15%, then a 50%/50% division moves to 65%/35%.
The fourth step is to stand back, look at the outcome and decide if it ‘looks right’. Only rarely is further adjustment necessary under this step.
To implement the resultant percentage division, you can sell the house and divide the proceeds, split superannuation so that one party takes a percentage share of the other party’s superannuation and rolls it into their own superannuation fund, and one party can pay a lump sum to acquire the other party’s share in the family business. The ultimate result can be varied by the parties agreeing that they want to take more or less of one particular asset, such as trading off their entitlement to a share of superannuation against their share of the business. Done properly, parties can avoid stamp duty and capital gains tax, and can put themselves in a much better position to be able to purchase a home in the future. Your solicitor can assist you to manage this process.
Matthew Coates has been with Watkins Tapsell for almost 25 years. He is a Partner of the firm and advises on Family Law and De Facto relationship issues covering property, maintenance and children. Matthew has advised clients extensively on the use of binding financial (pre-nuptial) agreements as a means of protecting assets from claims by spouses.
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