Selling Property During a Divorce: What You Need to Know

Property Sales During Separation

Property is usually the largest asset in a divorce. How it's handled can significantly impact both parties' financial futures. Here's what you need to know.

Legal Framework

Family Law Act

Under Australian family law, property settlement can be resolved by:
1. Agreement — both parties agree on how to divide assets
2. Consent orders — an agreement approved by the Family Court
3. Court orders — a judge decides the division

You have 12 months after a divorce is finalised to apply for property orders. For de facto relationships, the limit is 2 years after separation.

Can One Party Force a Sale?

Either party can apply to the Family Court for orders requiring the property to be sold. The court will consider:
- Whether sale is the most practical outcome
- The financial impact on both parties and children
- Whether one party can buy the other out
- Current market conditions

Selling Options

Option 1: Sell and Split

The most common and cleanest option. Sell the property at market value, pay all debts and costs, and divide the net proceeds according to your agreement.

Advantages: Clean break, clear valuation, immediate distribution.
Disadvantages: Both parties need alternative housing, potential CGT.

Option 2: One Party Buys the Other Out

One spouse keeps the property and pays the other their share. Requires:
- An agreed valuation (get two independent appraisals)
- The buying party must be able to refinance in their name alone
- A formal property settlement agreement

Option 3: Deferred Sale

The property is retained (often until children finish school) then sold. Requires a binding agreement on:
- Who lives in the property and pays expenses
- How future value changes are shared
- A defined trigger date for sale

Tax Implications

CGT Rollover

Transfers of property between spouses as part of a Family Court order or binding financial agreement are CGT-exempt under the rollover provisions. The receiving spouse inherits the original cost base.

This means:
- Transferring to one spouse: no CGT event
- Selling to a third party: CGT applies as normal based on the original purchase details

Main Residence Exemption

If the property was the family home, the main residence exemption may still apply — even if one spouse has moved out — provided the other spouse continues to live there.

Practical Considerations

Choosing a Neutral Agent

Both parties should agree on the selling agent. If you can't agree, each nominate an agent and flip a coin, or ask your lawyers to recommend someone.

Key requirement: the agent must act transparently with both parties, providing equal access to information and feedback.

Setting the Price

Get two independent market appraisals. If they differ by more than 5%, get a third. Use the average as your listing price. This removes the risk of one party manipulating the price.

Managing Inspections

Coordinate inspection access through the agent, not directly. This reduces conflict and ensures the property is presented well for every inspection.

Proceeds Distribution

Sale proceeds go to your conveyancer's trust account and are distributed according to your property settlement agreement or court orders. Neither party can unilaterally access the funds.

Protecting Your Interests

1. Get independent legal advice — even if the separation is amicable
2. Don't sign anything without your lawyer reviewing it
3. Don't make major changes to the property without agreement
4. Keep records of all expenses you pay on the property after separation
5. Don't delay — property values change and legal positions can shift

If you need a market appraisal for property settlement purposes, contact our team. We provide detailed, evidence-based appraisals suitable for family law proceedings.