AUSTRALIA Law and Practice Contributed by: William Moore, Frank Hinoporos, Emma Woolley and Todd Bromwich, Hall & Wilcox
2.3 Forced Heirship Laws Australia does not have forced heirship laws, but these rules may still be relevant for Australian residents who hold assets in jurisdictions where such laws apply. In those cases, the law of the country where the property is situated may determine how that property passes. The following applies for those domiciled in the states and territories of Australia. • Testamentary freedom is a fundamental and central principle referring to a person’s right to decide how to distribute their assets after they die. • If a person dies without a valid Will, their estate is distributed according to the rules of intestacy set out in the relevant state-based succession legislation, which effectively allocates assets to family members based on their relationship to the deceased. • However, eligible persons (such as, but not limited to, spouses, de facto partners, children and other dependents) can make a family provision claim if they believe the Will or rules of intestacy fail to make adequate provision for their proper mainte - nance and support. 2.4 Marital Property In Australia, the categorisation of property and the way in which it is owned or registered generally holds little relevance for the purposes of family law. Under the Family Law Act 1975 (Cth) (Family Law Act), the term “property” is defined broadly to capture a wide range of assets and interests that may form part of a couple’s financial circumstances. When a relationship breaks down, property division is assessed through a four-step process, which takes into account each party’s assets, liabilities, superan - nuation and financial resources. In certain situations, particular assets may be excluded, depending on how and when they were acquired. The four-step process includes: • identifying and valuing the “property pool”; • assessing contributions, both financial and non- financial, made by each party throughout the relationship;
• considering future needs, such as income disparity, health, age, and care of children; and • determining whether the proposed outcome is just and equitable in all the circumstances. The most effective way to protect assets from poten - tial family law claims is a binding financial agreement, properly prepared and executed under the Family Law Act. These can be entered into before, during or after a marriage or de facto relationship. For a binding financial agreement to be valid and enforceable in Australia: • both parties must obtain independent legal advice prior to signing the agreement, and each lawyer must provide a certificate of advice, which is then annexed to the document; • the agreement must be in writing and signed by both parties; and • it must strictly comply with the formal requirements set out in the Family Law Act. A crucial element in the effectiveness of a binding financial agreement is full and frank financial dis - closure by both parties: failure to disclose relevant financial information can result in the agreement being challenged and potentially set aside by a court. 2.5 Transfer of Property CGT applies when a CGT event occurs, typically involving the disposal of a CGT asset (which includes most forms of property, tangible or intangible, unless specifically exempt). During a person’s lifetime, the capital gain or loss is calculated based on capital proceeds from the dis - posal or, where not at arm’s length, the market val - ue of the asset minus acquisition costs. On death, assets generally pass to beneficiaries without imme - diate CGT consequences. For assets acquired on or after 20 September 1985, the beneficiary inherits the deceased’s original cost base. Assets acquired before 20 September 1985 are exempt as a pre-CGT asset. If the beneficiary later sells pre-CGT assets, CGT may apply on the increase in value since the date of death.
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