Capital Gains Tax in Property Settlements: What the Court Considers

When dividing property after separation, the Family Court does not automatically factor in capital gains tax (“CGT”). In this post, we explore when CGT is taken into account and what recent case law tells us.

When Does the Court Consider Capital Gains Tax?

If the Family Court orders the sale of an asset that will trigger CGT or if the court is satisfied that the sale is inevitable or likely to occur in the near future, an allowance for the CGT liability may be made.

However, CGT is not automatically deducted from the asset pool in property settlements. The party seeking to deduct it must prove that a sale is likely or inevitable.

Case Example: Marlin & Henson [2025] FedCFamC1A 71

The recent case of Marlin & Henson involved an appeal by the husband, in which the husband contended that the trial judge made an error by failing to include in the property pool the CGT on investment properties owned by the husband.

The husband’s case relied on the following factors:

• That while he was giving oral evidence at the hearing, the husband said that he would be required to sell particular properties to make good an order for a cash payment to the respondent

• He also said he intended to retire and sell the properties within 3–5 years.

  
  

However, the Court did not accept his position. Why?

1. The husband did not seek orders for the sale of property.

2. The husband rejected the suggestion to transfer property to the wife in a way that would defer the CGT liability.

3. He failed to prove that the sale of the properties was inevitable, likely, or even planned in the near future. 

   
   

As a result, the Court did not deduct any CGT liability from the net asset pool, and the husband’s appeal was dismissed.

What This Means If You're Separating

If you own investment properties and are going through a separation, it’s important to understand that:

• Capital gains tax is not automatically accounted for in your property settlement.

• To have CGT considered, you must provide clear evidence that the property will be sold.

  
  

At Moran Family Law, we help clients navigate the complexities of separation and property division with clear and practical legal advice tailored to your situation.

Disclaimer: This article is for general information only and does not constitute legal advice. Every family situation is different. If you need advice about your specific circumstances, you should speak to a family lawyer. You can contact Moran Family Law for advice tailored to your situation.