Separating your finances
Separating your finances

No one enters into marriage expecting to divorce, but it’s a fact of life for many couples. One in three Australian marriages will end in divorce, after an average of 12 years.i In that time, couples are likely to have intertwined their finances, taken out a mortgage and perhaps had one or more children.

The great untangling

While the process of separation and divorce is never easy, it will be far less stressful for both partners if you can set about separating your finances promptly and fairly in a tax effective manner. ASIC’s MoneySmart websiteii has a checklist of the steps you need to take, but here’s a brief guide to get you started.

Joint credit cards and accounts

Ideally, you and your partner will be able to agree on how any savings or debts should be divvied up before closing joint bank accounts and credit cards. If this is possible, close them and get your own bank account and credit card, with new PINs and passwords, as soon as possible. If agreement can’t be reached, a quick visit or phone call to the bank should be all that’s required to alert them to the changed circumstances and put in place restrictions to stop either party running up debts or making large withdrawals.

The family home

Here’s where things start to get complicated, especially as separation usually involves one party having to rent or buy alternative accommodation. Once again, it will be cheaper and simpler if you and your ex can come to at least a temporary agreement about how the rent or mortgage, and any utility bills, on the previously shared residence will be paid.

If you have a joint mortgage with a redraw facility, either cancel it or insist on joint signatures for any withdrawals. Ultimately, agreement will need to be reached on when to sell any shared property and how to divide the proceeds. This will take some time, and will require careful planning from a tax perspective so that you don’t incur significant unintended costs. You will also need to involve solicitors or a mediator, and require the arrangements being formalised by the Family or Federal Circuit Court.

Childcare expenses

There are two options when it comes to dividing child-related costs. You and your ex can work out something you think is fair, which is formally known as a ‘private child support agreement’. Alternatively, this can be left to the Department of Human Services to determine. While arrangements vary depending on individual circumstances, you can expect to be making a contribution to the living and education expenses of your children until they turn 18.


You might not be able to touch your super until retirement age but your ex may be entitled to a chunk of it in a divorce settlement. That’s because super is treated as joint property. Once again, you and your ex have the option of agreeing to an arrangement that both of you think is fair. Alternatively, your super balances will be effectively pooled then divided – the default option being a 50-50 split – according to a court order.

Everything else

When it comes to furniture, artwork, jewellery and white goods, once again it’s a matter of coming to an agreement with your ex or leaving it to the court to decide. While it’s easy to get fixated on ‘winning’ ownership fights, it’s rarely worth incurring large legal costs to gain possession of relatively inexpensive goods. You most likely won’t have any income tax implications from selling personal belongings, but if you are approaching retirement age, you may wish to consider how assets above a certain level can affect your age pension entitlements.

Tying up the loose ends

You’ll also need to update your will, particularly any power-of-attorney provisions, as well as your life insurance and super policies. If you would like to discuss how your changed circumstance may impact things such as your tax planning and other financial issues, don’t hesitate to give us a call.

Like most aspects of divorcing, separating finances commonly involves lots of time and not a little heartache. However, if you maintain a businesslike attitude you will be best placed to get through the process as quickly and smoothly as possible and come out the other side well prepared for the next chapter of your life.

i Fast facts on marriage’, McCrindle, 13 Feb 2015,



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