How to Protect your Home

Of course this arrangement will only work if you actually have a spouse or partner and if there is no litigation directly against your spouse or partner for any reason.   It is therefore not the best solution for optimum asset protection and other avenues need to be explored.

With the divorce statistics in this country peaking at over 50%, many of you who do have a spouse may ask what happens in the case of a marriage split if all the core assets are in your spouses name because he or she is in the profession or business with the lowest risk?   Well the family law court sees through all structures and ownerships, and the assets will be divided in the same proportions as if all marital assets were jointly owned.   It is only pre marital assets which may be treated differently.  

It is also worth noting that assets transferred as a result of a court-awarded property settlement in a divorce situation, do not incur any stamp duty or capital gains tax liability at the time of transfer.  Capital gains tax may be payable however if, or when, the asset is ultimately sold by the receiving party.  That is, if an investment property was transferred as a result of a divorce, the receiving party would have to pay capital gains tax when they eventually sold the property and they would be taxed as if they had owned the property themselves all along.   If the property was their principle place of residence and it remained their principle place or residence, then of course, no capital gains tax would be payable.

Under Insurance:

A report by the Australian Securities and Investments Commission (ASIC) examining the under-insurance of home buildings in Australia found there are significant levels of under-insurance by Australian homeowners, especially against current rebuilding costs.

The ASIC report, ‘Getting home insurance right – A report into under-insurance’, was commissioned after the Canberra bushfires and suggests that Canberra homeowners affected by the fires were underinsured by between 27 per cent and 40 per cent on average.

The report also noted research which found that at least 27 per cent, and possibly as many as 81 per cent of homeowners are under-insured by 10 per cent or more. It also found that 24 per cent of consumers did not increase their insurance following renovations costing between $20,000 and $60,000. Source: Australian Securities and Investments Commission (ASIC) Fido 2005 Is your home underinsured? www.fido.gov.au/underinsured (accessed 8/09/2005) 

The advice in the report suggested the following points:

1. Even if you think you have enough insurance, you should check your level of cover, particularly if you haven't increased it for a number of years;
2. Online calculators are a practical way to work out how much to insure for but not all calculators are the same. The best calculators ask 20 to 30 questions about your home and take all the features identified into account in providing an estimate;
3. If you think you can't afford to increase your cover, consider increasing your excess and reducing the premium, or shop around for the cheapest cover by using websites to obtain online quotes and compare prices;
4. If you have calculated your level of cover by taking the purchase price of your property, and deducting the value of the land, then you are at risk of being under-insured. This method generally produces a figure that is much too low; and
5. If you are doing renovations you need to increase your level of cover immediately.

Don't wait until the next renewal.