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In this case the Full Court of the Federal Circuit and Family Court of Australia has again affirmed the guiding principles set out in Rosati v Rosati [1998] FamCA 38 as to the treatment of potential capital gains tax in property settlement proceedings.
In proceedings between the wife and the estate of the late husband, the equity division of the Supreme Court of New South Wales made property settlement Orders pursuant to section 79 of the Family Law Act 1975 (Cth) following the breakdown of the parties’ 10-year relationship.
At first instance, Court heard that the deceased husband was a shareholder of C Pty Ltd. The shareholders deed for C Pty Ltd provided for the three surviving shareholders to determine the future of C Pty Ltd after the husband’s death.
The surviving shareholders determined that C Pty Ltd would be wound up 'in the near to medium-term',1 and, as part of that process, the shares it held in G Ltd were to be sold.
The primary judge found that the value of the appellant’s shareholding in C Pty Ltd was $105,000,000 on the basis that capital gains tax rollover relief could be available to the surviving shareholders if they decided to divide the shares in specie rather than progress to a sale, such that the capital gains tax could be avoided all together.
This finding was contrary to the expert accountant’s evidence and the expressed intention of the surviving shareholders.
The administrators of the husband’s estate appealed the decision on the basis that the primary judge erred in finding that the value of the appellant’s shareholding was $105,000,000 and by failing to apply a discount for the likely capital gains tax. The appellants agitated for a finding that the value of the minority shareholding was, net of capital gains tax, $95,432,473.80.
The Full Court allowed the appeal and observed:
This is a reminder to financial advisors and family law solicitors to be alert to any capital gains tax likely to arise and the options available to parties in those circumstances. Whether that liability will be taken into consideration by the court will turn on the circumstances the case and the evidence provided as to the 'certainty and immediacy of a CGT liability'.3
In light of recent reports that the federal government may announce changes to the capital gains tax discount in the May 2026 budget, it is important that parties to property settlement proceedings are aware of the potentially significant capital gains tax liabilities that lie dormant in their balance sheet and how those liabilities might be dealt with by the court.
Shehu & Vicario [2026] FedCFamC1A 49
Footnotes
1. Shehu & Vicario [2026] FedCFamC1A 49 at [63(4)(a)].
2. Shehu & Vicario [2026] FedCFamC1A 49 at [79].
3. Shehu & Vicario [2026] FedCFamC1A 49 at [67] citing Marlin v Henson (2025) 71 Fam LR 344 at [39].
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