Going through a divorce is undeniably complex. One of the core challenges is achieving an accurate and fair valuation of shared assets. Property valuation, if done incorrectly, can lead to skewed distributions, potentially causing further disputes. When managing marital property, there are several pitfalls to avoid. Here's a detailed guide on common property valuation mistakes during divorce and how to avoid them:
1. The Superannuation Trap
Superannuation often constitutes a major chunk of marital assets. Achieving an accurate superannuation valuation and understanding the specifics of division is key to a balanced settlement. Keep in mind that it's not an automatic split and often requires dedicated documentation.
2. Navigating the Capital Gains Tax (CGT) Maze
It's vital to be aware of CGT exemptions available for primary residences. A clear understanding of these exemptions ensures you don't face unforeseen tax implications.
3. The Critical Role of Expert Property Valuation
DIY or outdated valuations can create substantial disparities in settlements. Engaging a professional valuer like ValuConsult ensures that you are getting an accurate market price for your property.
4. Understanding the Capital Gains Tax (CGT) Rollover Relief
Certain property transfers during divorce might be eligible for CGT rollover relief, affecting future tax liabilities. Familiarise yourself with conditions under which this relief applies. Being aware of this can help you plan for future tax events and avoid surprises.
5. The Perils of Outdated Property Valuations
Relying on old valuations can be a very costly mistake. Regularly update valuations, especially in volatile markets, ensuring that the division is based on current market values.
6. Balance Emotional Value vs. Market Value
It's easy to let emotions cloud judgement. Remember to separate sentimental value from real market value to ensure an equitable division.
7. Hidden Costs: The Silent Value Diminishers
Properties normally carry hidden expenses, such as maintenance, sale fees or other associated costs. Incorporate these potential costs when determining a property's net value.
8. Factoring in Debts and Liabilities
For a truly balanced property division, always factor in associated debts, like mortgages, that come with certain properties.
9. Often Overlooked Hidden Value
There might be aspects of a shared property that may not be immediately obvious or may be overlooked, but which can add considerable value to the property. These include: unutilised development potential, potential for rezoning, future infrastructure developments and air rights.
10. Forecasting Future Property Value Growth
Some assets have growth potential. Assess them not just for current market value, but also for future appreciation prospects.