Getting through a divorce is hard on both your finances and your emotions. When you’ve lived with someone, it can seem challenging to get your shared assets in order. For many Australian couples, a big part of their life together is like renting out their home. Rental income can quickly turn into a source of conflict when it was once a source of financial security. How will your rental income change if you and your partner decide to move out?
This question comes up a lot, and the answer isn’t always clear. Simply paying the person whose name appears on the title is not sufficient. Australian law adopts a much broader approach. Let me break it down in a nice, non-technical way.
The Great Asset Pool: It All Goes In
Organising all your assets, including investment homes, in various locations allows you to view them as a unified “asset pool” that requires distribution. It does not matter if one person put down more money or if the house was bought under one name. The family home, shares, superannuation, and yes, even your rental property are all on the table.
One also thinks about how much money that rented property brings in. The treatment of the rented property as a source of income for the relationship hinges on several key factors. The Family Court of Australia uses a four-step process to come to a fair and equitable property deal. This process checks all of the parties’ assets and debts, looks at their non-monetary and monetary contributions, imagines what each person will need in the future, and finally makes sure the overall deal is fair and reasonable.
To Sell, to Keep, or to Co-own? Your Options for the Property
When it comes to the property’s actual features, you usually have three main choices:
- Sell the Property: One of the best ways to handle a joint purchase is to sell it and split the money you make. This gives everyone a nice cash break and lets both sides move forward with their own investments.
- One Partner Buys Out the Other: On the other hand, one partner could buy the other’s share. If one of you is very attached to the property or wants to stay in the real estate market, this is a favourable choice. Of course, such an arrangement will only work if that person has enough money to do so.
- Continue to Co-own: After their divorce, some couples choose to continue living together in the house. That could be a beneficial choice if the property is negatively geared and gives you and the buyer tax breaks, or if you are waiting for a better time to sell. But such an arrangement still needs a strong co-ownership deal and a lot of talking. If you own a rental property, knowing the market will help you decide what to do. For example, if you are looking at Sunshine Coast units for sale, you should know its current value and rental yield.
The All-Important Income: Spousal Maintenance and Child Support
What will happen to the rental income during this time? Your rental property’s income will likely be taken into account when making any short-term financial plans until your property settlement is settled.
This process is very important when it comes to child support and spousal support in particular. If one partner’s income drops, the court may order the other to pay spousal support for a time. The court will consider the rental income to determine the paying partner’s ability to provide this support.
All of both parents’ income sources are considered when calculating child support. This is for your salary, any profits from the business, and, you got it, your net rental income. So, the rent paid each month is directly related to the child support owed.
Navigating the Financial Maze: A Helping Hand
It can be difficult to divide assets, especially when rental income is involved. One example is that people should think a lot about the tax effects of selling or moving a house. At this point, seeking assistance from a professional can be very beneficial. When you work with wealth management services, you’ll be able to see your finances more clearly and be helped to make smart choices that will protect your future. Along with your family lawyer, a financial planner can help make sure that your property settlement is fair and saves you money on taxes.
The Final Word
Getting over the end of a relationship is challenging, and worrying about money can add to the stress. In a divorce, your rental income is part of your shared finances.
At this point in the process, it is best to get professional legal and financial help. This will help you understand your rights and responsibilities and find a way to get a just and fair result.
You should now have a better idea of what to expect. Please leave a note below if you are getting divorced and have questions about your rented property. Your experiences can be a giant source of hope for people who are going through the same thing.