Category: Property Settlement

What is a caveat and how may it be used to protect real estate in family law?

Posted onAuthorGabby Bridger

By Gabby Bridger

When parties separate, sometimes one or the other must take steps to protect the assets before a family law property settlement is formalised. One tool that is available to protect the matrimonial assets is the lodgement of a caveat on the tile to real property.

What is a caveat?
A caveat is a notice at large that is recorded on the title of real property to protect the interest which the caveator may have on the real property. Any third party who may seek to deal with the real property is placed on notice about the caveator’s claim by the existence of the caveat.

When may a caveat be used in family law?
Sometimes in a relationship, both parties have an interest in a property but only one party’s name is on the title. This may be for a range of reasons, such as one party bought the property prior to the relationship or for tax purposes. Even if the property is just in one party’s name, the other party may still have a caveatable interest. For example, if both parties have contributed to paying the mortgage on a house or one party made other financial or non-financial contributions throughout the relationship. However, not everyone will have a caveatable interest, so legal advice should be sought to determine whether you have an interest.

If you share a property with your spouse or partner, but the property is solely in your spouse’s name, he/she may have the ability to deal with that property without your consent. This may become a problem in family law matters, if the property should form part of the overall property pool, yet the person on title sells it, uses the equity, transfers a share to someone else or uses the property as security to raise a loan. A caveat may prevent your spouse dealing with the property before the Court may deal with the family law dispute. .

How may a caveat help protect you?
In a family law property dispute, lodging a caveat on a property protects your interest in it. This will stop the other party, who is on title, dealing with the property in a way that could detriment you. A caveat also acts as a warning for anyone else who does a search of the property; they would see that someone else has an interest in the property. In order to sell or deal with the property, the caveat would need to be removed.

Proceed with caution! Are there any risks in lodging a caveat?
Whether a party has a caveatable interest in a property in a family law matter is a complex question on law that must be considered on its own facts.

There are risks associated with lodging a caveat if you do not have a caveatable interest in the property. If you lodge a caveat without having an interest in the property and financial loss is then suffered by the person on title, you may be liable to pay compensation. Therefore, it is important to seek legal advice to determine your interest in a property and whether it is appropriate to lodge a caveat.

We can help you work out whether you have an interest in the property that allows you to safely lodge a caveat.

To speak to one of our family lawyers about how to protect your property, or to find out what you are entitled to or to make an appointment at either our Canberra or Queanbeyan office, contact us on:

info@elringtons.com.au| p: 02 6206 1300

For more information:

Elringtons Family Law
Family Law: Property Disputes and Settlements

Stamp Duty & Capital Gains Tax Concessions In Family Law Property Matters

Posted onAuthorCarlos Turini

By Carlos Turini – Family Law Specialist

There are many good reasons why former spouses should formalise legally their property settlement including that they may be exempted from paying stamp duty which is otherwise payable for the transfer of title to their real property, cars and shares.

They may also be exempted from paying capital gains tax when they sell the home they formerly owned together.

These exemptions normally represent savings of tens of thousands of dollars.

The exemptions will apply to married couples and their children and to partners of a de facto relationship and their children.

From 1 July 2009 the marriage or relationship breakdown rollover is extended to same-sex couples.[1]

The exemptions are available if the parties enter into consent orders or a financial agreement under the Family Law Act 1975.

Stamp Duties exemptions in New South Wales

Part 7 of the Duties Act 1997 (NSW) details the exemptions applicable to the payment of duty for certain transactions including the transfer of title transfer to property between former spouses or between former spouses and their children.

The transfer of the property of a trust to one of the spouses may also be exempted from stamp duty.

Importantly, in order to be entitled to the exemption, the parties must enter into a legal document which is recognised under the Act as appropriate including:

  • Orders made under the Family Law Act including consent orders; or
  • A financial agreement

The Chief Commissioner of Stamp Duties (NSW) also has the discretion to accept other form of agreements provided that the Commissioner is satisfied that that the agreement was made “for the purpose of dividing matrimonial property as a consequence of the dissolution, annulment or breakdown of the marriage”.

The easiest way to obtain the exemptions is for the parties to enter into consent orders or a financial agreement. Such documents if properly drafted will attract the exemptions without the need for the Commissioner’s discretion in order to be approved.

Stamp Duties exemptions in Australian Capital Territory

Similarly, in the Australian Capital Territory, former spouses may be exempted from paying stamp duty in relation to the transfer of title to their property if made as part of consent orders or a financial agreement under the Family Law Act 1975 (Cth) or the Married Persons Property Act 1986.

Capital Gains Tax exemptions

As a general proposition, the sale of assets such as real estate, shares or managed fund investments attracts a tax liability on the capital gain made on the sale. There are some exemptions, for example, on the sale of the matrimonial home.[2]

In relation to family law matters, a party who acquires sole title to the former matrimonial home in his/her own name as part of a formal family law property settlement will normally be exempted from paying capital gains tax when that party sells the property. There are numerous considerations even in that simple scenario including, for example:

(1)   Whether the proprietor has continued to use the property as the main residence;

(2)   Whether that party used the home also to run his/her business;

(3)   The title to the real property was transferred from the party as an individual to an entity such as a trust or a super fund

Other more complex family law scenarios which may attract relief from capital gains tax may relate, for example, to investment properties. If title to an investment property is transferred to one of the parties (rather than an entity) as part of a family law property settlement, that party may be entitled to “roll over “relief or postponement of the capital gains tax liability.

Family lawyers are not normally tax experts and it is important that parties involved in a family law property matter obtain appropriate advice. In addition to obtaining legal advice from a family law expert, it is important to obtain taxation advice from their accountant and or their registered financial adviser[3] about the tax implications of the family law property settlement that they have in mind.

First Home Owners Grants Entitlements and Family Law Property Settlements

In addition, there are concessions offered in the ACT to persons who previously received a First Home Owners Grant but have since transferred title to the property as a result of a family law property settlement – See: ACT Government Concession scheme

For more information or to make and appointment in either our Canberra or Queanbeyan office please contact:  Carlos Turini http://elringtons.com.au/wp-content/uploads/2011/07/Specialist-accreditaion.jpg

e: cturini@elringtons.com.au | p: 02 6206 1300

[1] 1. Marriage or relationship breakdown and transferring of assets  – https://www.ato.gov.au/general/capital-gains-tax/relationship-breakdown/agreements-the-rollover-applies-to/

[2] There are numerous considerations regarding such exemptions including, for example, whether the property was being used also to operate a business.

[3] Registered with the Taxation Practitioner Board.

Family Law – Private Binding Child Support Agreements

Posted onAuthorCarlos Turini

By Carlos Turini – Family Law Specialist

On occasions, the parents of a child prefer to come to an agreement regarding child support which is outside the formula which exists under the Child Support (Assessment) Act 1989 (“the Act”). Both parents may prefer to work ‘outside the square’ as it suits them both to have an arrangement which is outside the formula. The agreement may be formalised legally and lodged with the child Support Agency (“the Agency”) under Part 6 and 7 of the Act. The agreement would then be binding upon the parties.

A private child support agreement may be appropriate, for example in one of the following cases:

  • If the child attends a private school and the parents agree to share on the school fees;
  • If the child is likely to require expensive orthodontic work;
  • If, as part of a family law property settlement, one parent pays a lump sum amount of child support or transfer’s a property in lieu of child support.

Formalities

For a child support agreement to be binding under the Act it must comply with a number of requirements. Each party must obtain independent legal advice and each solicitor must complete and sign a certificate of legal advice which must be attached to the agreement.

Private school fees, medical and dental expenses as part of child support agreement

Both the party who has an obligation to pay child support (“the payer”) and the party entitled to receive child support (“the payee”) may be happy to enter into a private child support agreement outside the formula.

Lump sum child support and transfer of real property in lieu of child support

Sometimes, parties have a long term commitment that their child will attend or continue to attend a private school. The school fees may be substantial, often greater than the periodic payments which would be required under the formula. The parties may agree, and formalize the agreement legally, to provide that both parties will share the school fees and the obligation of the parent to make periodic payments be reduced or cancel altogether.

The parties may have a commitment that the child will receive the best medical and dental care and they enter into a private agreement to make provision for such expenses to be shared and for the periodic payments required to be reduced or cancelled.

Private child support agreements provide a large degree of flexibility to parties negotiating a settlement to separate their assets. A party entitled to receive child support may instead retain an asset including an investment, shares or real property in lieu of future child support for a number of years.

As an example, the payee may be a parent only working part time and having the primary care of the children. Both parents may wish for the children to continue to live in the former matrimonial home rather than the primary carer and children having to move to accommodation of an inferior quality. However, the payee would be unable to pay the other party a sum of money representing his/her share to the title to the property. The parties may agree that child support payments for the children for the next five years would be equivalent to the value of the payer’s share to the property. A private child support agreement could provide that the payer will transfer title to the house to the payee in lieu of child support payments for five years.

Approval by Agency

Importantly, such an agreement would need to be approved by the Registrar of the Child Support Agency. The Registrar may refuse registration if the agreement is considered to be less beneficial to the payee than if he/she continued to receive periodic payments pursuant to an assessment.

The parties may choose not to ledge a private agreement for registration. However, the payee must take care to ensure that a private child support agreement will not affect his/her Centrelink entitlements if not approved.

For more information please contact:

Carlos Turini at: cturini@elringtons.com.au or call Carlos on: 02 6206 1300

Further Reading:

Child Support

Challenging Child Support Assessments

Family Law: Property Disputes and Settlements

Posted onAuthorCarlos Turini

The Full Court of the Family Court some years ago[1] identified  the steps that the Court must follow to decide property matters between former spouses pursuant to section 79 and 75(2) of the Family Law Act. The Full Court’s approach has become a guide to parties’ entitlements. This approach became known as “the four-steps approach” and it has been applied to family law matters for some years since. The Court applies the four-steps approach in circumstances where parties are (or were) married or in a de facto relationship.

A more recent, very significant, decision of the High Court of Australia [2] raised questions about whether the four-steps approach continues to be the appropriate approach in all cases. In spite of the this decision, the four-steps approach remains an important guide to assess what should be an appropriate family law property adjustment in a particular case even if it “merely illuminates the path to the ultimate result”.[3]

The four-steps approach should be used to analyse the likely outcome of a property matter whether or not parties wish to negotiate a settlement or to take the matter to Court.

Examples

Below are a couple of examples about how the four-steps approach is applied by courts in different cases:

The four steps mentioned above provide a general overview of the court’s approach to property settlement and a useful guidance to a solicitor to assess what is his/her client’s entitlement in a particular case. For a more detailed advice on your specific circumstances we invite you to contact our team.

For more information call Carlos Turini or to make an appointment either our Canberra or Queanbeyan office:

p:  (02) 62061300 | e:  Carlos.Turini@elringtons.com.au

[1] Hickey v Hickey [2003] FamCA 395.

[2] Stanford v Stanford [2012] HCA 52 (15 November 2012). In that case, the Court emphasised the importance of section 75(2) of the Family Law Act which reads: The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order. The Family Court has wide discretion to adjust the proprietary rights of parties under the Family Law Act using the four-steps approach. There are some cases, however, when the Court should not disturb the parties’ proprietary rights and should not make any adjustments at all. A good example may be a short marriage or a short relationship.

[3] Bevan and Bevan [2013] FAM CAFC116

[4] The Court has a wide discretion about how to divide the parties’ superannuation entitlements. Normally, although not in all cases, the adjustment described in the example relates to the non-superannuation pool of assets. In that example, the Court is likely to divide the combined superannuation entitlements of the parties equally between them.