Before commencing property settlement negotiations, it is essential that you know what your assets and liabilities are worth. As this is a vital step in the separation process, it is not to be rushed and may necessitate obtaining valuation reports from expert valuers.
In Cargill Family Lawyers’ latest blog post, Rachel Jones discusses 7 of the most common assets and liabilities, and what you need to know about their valuation.
1. Real estate
When it comes to real estate, it is vitally important to ensure that the property (whether it is the family home and/or investment properties) is accurately valued. As a starting position, the parties may obtain property appraisals from a panel of trusted real estate agents.
When property appraisals are not agreed upon, a property valuer should be jointly retained by the parties in accordance with rule 7.03 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (the Rules) to prepare a report that provides the current market value of the property in accordance with Divisions 7.1.4, 7.1.5 and 7.2.6 of the Rules.
Something important for both parties to be mindful of is any tax liabilities that may be attached to the properties concerned, such as:
● Capital gains tax
● Land tax
● Windfall tax
These liabilities might need to be taken into account and reflected in the final property settlement agreement reached.
The business interests held by either or both parties ‘may’ also need to be valued by an accredited valuer or forensic accountant in accordance with the Rules (see above). Whether the parties’ business interests need to be formally valued will depend on the nature of the business interest. To value a business interest, the valuer will require access to the business’s accounting records to include: the last 3 years’ worth of tax returns, financial statements, profit and loss accounts, and depreciation schedules. The valuer will also need to obtain a thorough understanding of the business's corporate structure and how it operates in the marketplace.
If you or your partner's superannuation funds are simply an accumulation type fund, then the last
superannuation statement and current balance may be adequate for a valuation. Alternatively, you can obtain information about your respective superannuation funds by serving a completed Form 6 information request on the relevant trustee of the superannuation fund/s. You can download a copy of Form 6 Request for Information form contained within the Superannuation Information Kit from the Federal Circuit and Family Court of Australia website here.
Other types of superannuation funds, such as defined benefit superannuation interests and self-
managed superannuation funds are more complicated to value and will generally need to be independently valued. To value a defined benefit superannuation fund, the valuer will require a completed Form 6 Information Request from the Trustee of the relevant fund (see the link above to download the form).
To value a Self-Managed Superannuation Fund (SMSF), the valuer will require the Trust deed, any variations to the Trust deed and any relevant accounting records. These will often include the last three year’s worth of: tax returns, financial statements, profit and loss accounts, depreciation schedules (if any) and minutes of trustees and member statements.
When it comes to SMSFs, we recommend our clients undertake a ‘health check’ of the fund, to ensure that it is fully compliant. This is because the consequences for having a non-compliant SMSF can be severe and may attract harsh penalties from the Australian Taxation Office.
The possibility of future penalties being imposed for non-compliance of a SMSF is definitely something that the parties should be aware of before a final property settlement agreement is reached!
4. Bank accounts
For cash savings and liabilities including credit cards, personal loans and car lease agreements, these will need to be accounted for in family law property settlements. Generally, the last 1 – 3 years of all bank statements will need to be exchanged between the parties if requested.
Any shareholding interests in private and publicly listed companies must be disclosed. To calculate a shareholding interest in a private company, the net value of the company’s interests will need to be ascertained. For shareholding interests in publicly listed companies, the most recent record of shares should be obtained and provided to the other party so that the current market value of the shares can be calculated.
6. Motor vehicles
In most cases, where the motor vehicles involved are not of a high value, the parties may agree to use the value ranges obtained from websites such as Redbook or Carsales. If the motor vehicle/s in question are of significant value however, due to being a luxury, classic or vintage model with unique specifications, an accredited valuer may need to be jointly retained to inspect and value the vehicle/s concerned.
7. Other assets
The list of other assets which may need to be individually valued by certified practicing valuers is long and varied, but can include:
● Plants and equipment
● Heavy machinery involved in farming or construction
● Boats and other marine vessels
● Fine art
● Antiques and jewellery
Keep in mind that obtaining asset valuations is generally an expensive exercise, hence a cost and benefit analysis should be undertaken by the parties before going down this path to ensure that the costs involved in obtaining a valuation report are proportionate to the overall outcome. It is also important to note that the Court will generally adopt the current market value or second-hand value of cars and chattels - not the replacement value.
For more information about how to commence a family law property settlement and valuing your assets and liabilities contact us today for a FREE 30-minute initial consultation.