The case of Rosati v Rosati (1998) FLC 92-804 is the most frequently quoted case in respect to whether the Court should include taxation in calculating the available property pool to be divided between the parties. In that case the Full Court said:

“It appears to us that although there is a degree of confusion, and possible conflict, in the reported cases as to the proper approach to be adopted by a court in proceedings under s79 of the Act in relation to the effect of potential capital gains tax, which would be payable upon the sale of an asset, the following general principles may be said to emerge from those cases:

1. Whether the incidence of capital gains tax should be taken into account in valuing a particular asset varies according to the circumstances of the case, including the method of valuation applied to the particular asset, the likelihood or otherwise of that asset being realised in the foreseeable future, the circumstances of its acquisitions and the evidence of the parties as to their intentions in relation to that asset.
2. If the Court orders the sale of an asset, or is satisfied that a sale of it is inevitable, or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then, generally, allowance should be made for any capital gains tax payable upon such a sale in determining the value of that asset for the purpose of the proceedings.
3. If none of the circumstances referred to in (2) applies to a particular asset, but the Court is satisfied that there is a significant risk that the asset will have to be sold in the short to mid-term, then the Court, whilst not making allowance for the capital gains tax payable upon such a sale in determining the value of the asset, may take that risk into account as a relevant s 75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.
4. There may be special circumstances in a particular case which, despite the absence of any certainty or even likelihood of a sale of an asset in the foreseeable future, make it appropriate to take the incidence of capital gains tax into account in valuing that asset. In such a case, it may be appropriate to take the capital gains tax into account at its full rate, or at some discounted rate, having regard to the degree of risk of a sale occurring and/or the length of time which is likely to elapse before that occurs.”

The issue was dealt with in the recent case of Boyle & Boyle [2014] FCCA 2576 heard in Melbourne.

In this case the husband said he had a liability of $68,625 being the capital gains tax liability on the parties’ holiday house. The husband was living in that house and said he had no present intention of selling it. He did not provide any expert evidence about the amount of capital gains tax that would be payable if he were to sell it. The figure he gave was his own estimate.

In accordance with the decision of the Full Court of the Family Court in Rosati the Court held that there was no proper basis upon which the Court could take into account the prospective capital gains tax on the holiday house.