Business Interests, Trusts and Property Settlements: Why Structure Matters
If you are separating and you or your former partner own a business, company or family trust, your property settlement can be more complicated than simply adding up the house, bank accounts and superannuation.
The structure behind the asset matters.
A business might be operated as a sole trader, partnership or through a company. You might hold interests through a family trust, or have several entities connected to the business. Each structure can raise different questions about ownership, control, value and how the interest should be treated as part of your property settlement.
For people with more complex financial arrangements, understanding the structure early can make a significant difference to how you approach negotiations and what information you need to gather.
Martens Legal's ideal client profile specifically identifies professionals with complex asset pools, including business interests, investments and superannuation, as clients who may need a more strategic approach to property settlement.
Why does business structure matter in a property settlement?
A property settlement considers more than just assets held jointly in both parties' names.
The Family Law Act 1975 gives the Court power to alter interests in property belonging to either party to a marriage, subject to the requirements of the legislation. The legislation also contains provisions allowing orders affecting third parties in certain circumstances.
This means that when a business, company or trust is involved, the first question is not simply:
"Whose name is it in?"
Instead, it may be necessary to understand:
What exactly does each party own?
Who controls the business or trust?
What is the business or interest worth?
What contributions were made to the business during the relationship?
What income or financial benefit does the structure provide?
Are there other shareholders, beneficiaries, partners or third parties?
What liabilities are attached to the business or structure?
What tax or structural consequences could arise from a proposed settlement?
The answers can affect how the overall financial position is assessed.
Martens Legal's existing guidance similarly identifies interests in a business, company, trust or partnership as matters that may need to be identified and valued as part of the property pool.
How are business interests treated in a property settlement?
There is no single approach that applies to every business.
The structure, ownership arrangements, financial records and circumstances of the relationship all matter.
For example, a business may be:
operated by one party as a sole trader
jointly owned by the parties
operated through a company
structured through a partnership
held through a unit trust
connected to a discretionary or family trust
part of a larger group of companies or related entities.
A business may also contain significant assets of its own, such as property, equipment, intellectual property, investments or cash.
This is why business valuation in separation can require specialist investigation.
A business valuation may consider its assets and liabilities, income, future earning capacity and the nature of the ownership interest. Martens Legal's guidance notes that businesses may need expert valuation where the parties cannot agree on their value.
Importantly, a business does not necessarily have to be sold simply because it is relevant to a property settlement. The settlement may instead involve one party retaining the business while other assets are allocated differently, depending on the circumstances and the agreement reached.
What about family trusts?
Trusts can be particularly confusing because the legal ownership of trust assets and a person's interest in the trust are not necessarily the same thing.
A trust generally involves a trustee holding property for the benefit of beneficiaries. Depending on the type of trust and the circumstances, a party may have different rights, powers or expectations connected to the trust.
That means you cannot simply assume:
"The house is owned by the trust, so it doesn't count."
Equally, it would be too simplistic to assume that every asset held by a trust automatically becomes an asset personally owned by one of the parties.
The actual structure needs to be examined.
The Family Law Act also contains specific provisions dealing with orders that can affect third parties and recognises that those provisions can operate despite provisions in a trust deed or other instrument.
This is one reason trust structures should be identified early rather than treated as an issue to deal with at the end of negotiations.
What documents might you need?
When a business, company or trust is involved, getting the right financial information together early can help clarify the position.
Depending on the structure, relevant documents may include:
trust deeds and amendments
company constitutions
ASIC records
shareholder information
partnership agreements
financial statements
business activity statements
tax returns
loan documents
bank statements
details of business assets and liabilities
records of distributions
information about related entities.
The Federal Circuit and Family Court of Australia identifies financial and business records among the documents that may be relevant in financial proceedings, including tax returns, business activity statements and documents concerning relevant financial interests.
Martens Legal also recommends gathering business, company and trust documents early when preparing for a property settlement or mediation.
The aim is not to create a mountain of paperwork for the sake of it. It is to understand the financial picture before important decisions are made.
How does the process work when a business or trust is involved?
A complex property settlement generally needs to start with the same basic question:
What is actually there?
1. Identify the structures
Start by identifying every relevant business, company, trust, partnership and other entity connected to either party.
2. Understand ownership and control
Look beyond the name on the paperwork. Determine who owns shares, who is a director, who acts as trustee, who has decision-making powers and who receives financial benefits.
3. Gather financial information
Obtain the relevant financial and corporate documents so the business or trust can be properly understood.
4. Establish value
If the parties cannot agree on the value of a business interest, an independent valuation may be required. The appropriate valuation methodology will depend on the nature of the business and the interest being valued.
5. Consider the settlement options
Once the financial position is understood, the parties can consider how the business interest fits into the broader settlement.
That could involve one party retaining the business while other assets are transferred or retained by the other party. In other circumstances, a sale, transfer of an interest or another arrangement may need to be considered.
The important point is that the business structure should be understood before the settlement is negotiated, rather than discovering its implications after an agreement has already been reached.
If you are preparing for mediation, our guide to how to prepare for family law mediation can help you understand what information and preparation may be required.
What can go wrong when the structure is overlooked?
A business or trust can create problems when the underlying structure is not properly identified or understood.
The business is undervalued
One party may believe the business has substantial value while the other considers it worth very little. An appropriate valuation process can help resolve disagreement about value.
Important entities are missed
A business may have related companies, trusts or other structures that are not immediately obvious from the business name itself.
The wrong documents are used
Incomplete or outdated financial information can make it difficult to understand the true financial position.
The settlement creates unintended consequences
A settlement involving a business or trust can have legal, financial and tax implications. The Family Law Act expressly requires certain taxation effects to be considered when the Court makes some orders affecting third parties.
This is why complex property settlements may require input from more than one professional. A family lawyer can advise on the family law issues, while an accountant, business valuer or financial adviser may be needed for specialist financial or valuation questions.
If you're wondering what a business is worth in a separation, you can also read our guide on how a business is valued in family law.
The structure matters, but so does the bigger picture
It is easy to become focused on one question:
"Can my ex claim an interest in my business?"
But property settlement is not simply about deciding who gets a particular asset.
The broader financial position needs to be considered, including the parties' assets, liabilities, contributions and relevant future circumstances. The Family Law Act provides the framework for determining property settlement matters, including the Court's consideration of contributions and other relevant circumstances.
For someone with a complex asset pool, this means the business or trust should be considered alongside everything else.
The goal is to understand the complete financial picture before deciding how the settlement should be structured.
Frequently asked questions
Does my ex automatically get half of my business?
No. There is no automatic rule that a former partner receives 50% of a business simply because the business is relevant to a property settlement. The outcome depends on the circumstances of the relationship and the overall property settlement process.
Is a business included in a property settlement if it is only in my name?
The fact that a business is held in one party's name does not, by itself, determine whether it is relevant to the property settlement. The nature and value of the interest, as well as the parties' contributions and other circumstances, need to be considered.
Can a family trust be included in a property settlement?
Trust structures require careful examination. The legal ownership of trust assets, the party's rights and control, and the financial benefits associated with the trust can all be relevant. The Family Law Act also contains provisions dealing with orders affecting third parties.
Do I need a business valuation for a property settlement?
Not necessarily. If the parties can agree on the value of the relevant business interest, an independent valuation may not be required. Where value is disputed or the business is complex, expert valuation evidence may be appropriate.
Can I keep my business after separation?
Possibly. A property settlement does not necessarily mean a business must be sold. Depending on the circumstances, one party may retain the business while the overall settlement is adjusted to account for its value.
What documents do I need if I own a business or trust?
This depends on the structure, but may include trust deeds, company documents, financial statements, tax returns, business activity statements, loan documents and other financial records.
Your business is only one part of the picture
Separation can become much more complicated when a business, company or trust is involved. But complexity does not mean you need to rush into court.
The first step is understanding what you own, how it is structured and what the structure means for your overall financial position.
From there, you can consider whether negotiation, mediation, arbitration or another pathway is appropriate for your circumstances.
At Martens Legal, the focus is on helping clients understand their financial position and work towards a clear, strategic resolution. This aligns with the firm's focus on negotiated property settlements, mediation and other resolution-focused options rather than unnecessary litigation.
If your separation involves a business, company, trust or other complex financial interests, getting advice early can help you understand the issues before you make decisions that may be difficult to unwind.
Starting over after separation is hard. Knowing where to start shouldn't be. Gain clarity, understand your options, and take your next step with confidence through our Separation Starter.
Disclaimer
This article provides general information only and does not constitute legal, financial, accounting or valuation advice. Every property settlement is different, particularly where businesses, companies or trusts are involved. You should obtain advice about your individual circumstances before making decisions about your property settlement.