The sad truth is that divorces are seldom pleasant. Almost everyone enters into marriage with the best intentions of a life long commitment but unfortunately, due to a variety of circumstances or events, this doesn’t always work out. The married couple is then forced to pursue a divorce and this is often a stressful and emotional time. Combine that with animosity between spouses and there is a natural drive to remove oneself from the other person as quickly as possible and at all costs.

There is an inherent danger in this type of behavior and while it may seem in one’s best interest at the time, it is important to note that rushing a divorce and not paying attention to details is not in your best interest.

While you are living as a married couple, the chances are good that you have been contributing to building shared wealth. You may have a property together, investments, retirement and more. When you enter a divorce and start to live independently, you are opening yourself up to a new set of expenses while you recover and find your feet in your new role as a single person. This requires money and the more money you have, the easier it will be to transition into your new life.

There is an expression that there are three spouses in a divorce, the husband, the wife and the taxman. This highlights the need to gain proper advice when entering into a divorce as an improperly executed divorce can mean that a significant amount of money is paid over to the taxman. By talking to a tax consultant, you will be advised on how to structure your divorce in a way that takes advantage of the provisions SARS has made and you will be offered advice to avoid unnecessary taxation.

Divorce and Capital Gains Tax

Assets like property will incur Capital Gains Tax when the monies for these are split between spouses. This is an area where you can potentially lose a lot of money to taxation. Luckily there are rollover provisions that are offered by SARS as long as you have the correct documentation.

Divorce and Retirement funds

Retirement savings often have the benefit of tax-free contributions but should you not be the primary member, a big mistake is to cash out your pension as it will be liable for taxation. We would recommend setting up a new retirement fund in your name and transferring your share into this account, tax-free.

We understand that divorce is a stressful time and understandably your head isn’t in the best space, but by taking the time to speak to a tax consultant, you can find yourself in a more favorable position afterwards with regards to tax. Feel free to contact Dirmeik Consulting today to book a consultation with a tax advisor. Call 021 421 4444.