What Happens to Your Family Home in Divorce?

The family home is usually the largest asset a couple owns, so deciding what happens to it is often one of the most significant parts of separating. Whether you stay, sell, or buy out your former partner's share depends on your circumstances, your finances, and what you can agree on. Getting clear on your options early can make the decisions ahead feel more manageable.

This is general information only and is not legal or financial advice. Family law changed on 10 June 2025, and the way property is divided now reflects those updated rules.

Your main options for the family home

Most separating couples have three broad choices.

One person keeps the home

Often one person, sometimes the parent who has the children most of the time, keeps the home and pays out the other person's share of the equity. For this to work, you usually need enough income or assets to refinance the mortgage into your sole name and cover the other person's entitlement. Lenders will want proof you can service the loan on your own.

Sell the home and divide the proceeds

Selling and splitting the net proceeds is often the simplest path, even if it is emotionally hard. After the mortgage and selling costs are paid, the remaining money is divided according to your agreement or a court order. This is common when neither person can afford to keep the home, or when both want a fresh start.

Defer the sale

Some couples agree to delay selling, for example until the youngest child finishes school. Usually one person stays in the home and the other waits for their share. This needs a clear, written agreement covering when the home will be sold, who pays the mortgage and outgoings in the meantime, and how the proceeds will be split.

How property is actually divided

Most separating couples reach their own agreement rather than going to a final hearing. Whether you agree privately or a court decides, the same legal framework applies. From 10 June 2025 that framework is set out in the Family Law Act 1975, and a court works through it in broad steps:

• Identify and value the asset pool. This means working out everything you each own and owe, including the home, mortgage, savings, superannuation, vehicles, and debts.
• Assess contributions. Both financial contributions (income, mortgage payments, what each person brought in) and non-financial contributions (renovations, homemaking, and parenting) are weighed.
• Consider current and future circumstances. Factors include each person's age, health, income, earning capacity, and care of children under 18.
• Check the outcome is just and equitable. The division must be fair in all the circumstances. A court does not simply assume a calculation is fair; it has to be satisfied the result is just and equitable.

If one person keeps the home, that is balanced against the rest of the pool. Keeping a valuable home may mean receiving less of the other assets, such as superannuation or savings.

Family violence and financial abuse are now considered

A significant change from 10 June 2025 is that a court must consider the economic effect of family violence where it is relevant to a property settlement. Family violence now expressly includes financial abuse. This can be relevant both to assessing contributions and to assessing each person's future circumstances, for example where abuse affected someone's ability to earn or left debt in their name.

What changed with "add-backs"

Under the rules that applied before 10 June 2025, money one person had spent could sometimes be "added back" and treated as though it were still in the pool. That approach has changed. Money that has genuinely been spent is generally no longer notionally added back. Instead, a court can take into account the effect of any material wastage of property caused intentionally or recklessly by a party. This is a technical area, so advice on your own situation matters.

Equity is what gets divided, not the full value

It helps to separate the home's value from the mortgage. If the home is worth $500,000 and the mortgage is $300,000, the equity is $200,000. It is the equity, along with the rest of your assets and debts, that is divided, not the full sale price.

If you want to keep the home, you generally need to pay out the other person's share of that equity, whether through savings, refinancing, or by giving up a claim to other assets such as superannuation.

Children and the family home

Where there are children, their care and stability are part of the picture. The parent who cares for the children most of the time may be in a stronger position to keep the home, but only if it is genuinely affordable. If keeping the home would leave that person in financial hardship, selling may still be the more realistic outcome. There is no automatic rule that the home goes to one parent.

Married couples and de facto couples

The property rules apply to both married and de facto couples. For de facto couples there is an added step: a court generally needs to be satisfied of at least one of the following before it can make property orders. The relationship lasted at least two years in total, or there is a child of the relationship, or one person made substantial contributions and serious injustice would result if no order were made, or the relationship was registered under a state or territory law. So while two years is the common benchmark, it is not the only way a de facto property claim can proceed.

Time limits to keep in mind

There are deadlines for applying to a court for property orders:

• If you were married, you generally have 12 months from the date your divorce becomes final.
• If you were in a de facto relationship, you generally have two years from the date the relationship ended.

You can ask a court for permission to apply outside these limits, but it is not always granted. Even if you reach an agreement privately, formalising it within these timeframes is wise.

Tax and duty: why formalising matters

How you document the transfer of the home can have real financial consequences.

• Capital gains tax (CGT). When the home is transferred between separating partners under a court order, consent order, or binding financial agreement, the relationship breakdown rollover may apply, which generally defers CGT rather than triggering it at the point of transfer. The main residence exemption may also reduce or remove CGT on the family home.
• Stamp duty. Most states and territories offer a duty exemption when property is transferred between partners because of a relationship breakdown, provided the transfer is documented through a consent order or binding financial agreement.

These concessions usually depend on having a formal agreement in place. An informal handshake arrangement may not qualify, which is one reason to document things properly.

Making your decisions with a clear picture

Before settling anything about the home, it helps to understand your full position: the home's value and mortgage, your other assets and debts, superannuation, income, and what you each will need going forward. With that picture, you can weigh your options and see what is genuinely affordable.

Separately gives you an assessment of how a property settlement might be structured, so you can explore different scenarios for the home and the rest of your finances before you make decisions or speak with a lawyer.

A formal settlement needs to be set down in a consent order or a binding financial agreement, and both partners should get independent legal advice. Taking that step protects what you have agreed and helps you move forward with confidence.