Sexually transferred debt- the right to substitute a party for a tax liability in a property settlement
While there is no doubt that a taxation liability of one spouse can be taken into account as part of a property settlement, the Family Court has recently confirmed that one spouse can be substituted for the other spouse in what is commonly referred to as sexually transmitted debt. This in terms of a liability owing to the Australian Taxation Office.
In Tomaras & Tomaras and Official Trustee in Bankruptcy and Commissioner of Taxation, the Wife and Husband agreed that the Wife’s debt to the Commissioner of Taxation (approximately $250,000) was to be passed to the Husband, in that he would be substituted for the debt. Proper notice was given to the Commissioner, who opposed the making of the Order.
The Commissioner was granted permission to intervene in the couple’s property settlement proceedings, resulting in the matter being referred to the Full Court of the Family Court of Australia.
In dealing with the case, the Full Court had to examine whether the Commissioner of Taxation was firstly bound by the relevant provisions of the Family Law Act. This is because there is a presumption that statutory provisions in general terms, do not bind the Crown.
The Full Court determined that the Crown presumption did not apply as the Crown could certainly benefit from the provisions of sexually transmitted debt (for instance, the substitution of such a debt could allow a more financially wealthy party to assume the debt, rather than an impecunious spouse).
Why is this decision important?
Where a non-financial spouse ends a relationship with significant personal taxation liabilities, it may be open to that spouse as part of their property settlement, to seek a substitution order rather than the liability remaining in their sole name or being paid from the available property.
For other spouses who may have been unwilling to share in the burden of a taxation liability accrued during the relationship, the liability can be included in the available property and can also be transferred directly to the other spouse if it would be just and equitable to do so. This case highlights the importance of spouses being aware that they may ultimately be responsible for another spouse’s taxation liabilities or penalties arising from their failure to lodge taxation returns or meet payment of taxation liabilities.
The principles of the case are important, but before Husbands and Wives get excited about substituting each other for pending tax debts, the Commissioner must be afforded procedural fairness (i.e given sufficient notice about the proposed Order) and further, if it is not foreseeable at the time, that the Order would result in the debt not being paid in full – in other words, if there is any doubt about the debt being paid in full by the substituted party, then the Court could not make the Order.
This case demonstrates that when it comes to tax liabilities:
- Parties should consider substitution of taxation liabilities as an option when drafting orders sought or negotiating settlements. However, note that the Order should be phrased in such a way as to direct the Commissioner to substitute one party for the other as opposed to stating that a party be solely responsible for the debt; and
- It cannot be assumed that the tax liability will remain with the original tax payer in property settlement proceedings.
Financial planners and/or accountants should be consulted early in negotiations to advise as to the most tax effective way in which the ability to substitute parties to a taxation liability should be undertaken.
At Rostron Carlyle Rojas Lawyers we pride ourselves in understanding the needs of our clients and helping them to navigate a property settlement that minimises their exposure to taxation and disruption to their professional lives, wherever possible.
When two become one – The impending merger of the Family and Federal Circuit Court and what this could mean for separated families
The Federal Government recently announced that the Family and Federal Circuit Courts of Australia will soon be merged in an attempt to slash blown-out waiting times and reduce trauma for families.
Both courts have power to decide family law disputes, however the Family Court is reserved for more complex family law matters such as, valuation of interests in trusts or corporate structures, matters that involve a child welfare agency, allegations of sexual or physical abuse or international relocation of children.
The Federal Circuit was originally established to deal with the shorter, simpler family law matters, freeing up the Family Court. In addition to hearing family law matters, the Federal Circuit Court is also responsible for hearing general matters such as administrative law, bankruptcy, industrial law and migration.
Presently in Brisbane, there are 4 Family Court judges and 11 Federal Circuit Court judges. The merger will see judges from the Family Court hear family law matters, while Federal Circuit Court judges will continue to hear family and general matters. Over time however, all judges will hear both family and general law cases.
Statistics released show that the median time taken to reach a trial has grown in both courts, with a national average of 15 months in the Federal Circuit Court and 17 months in the Family Court.
Often times, a matter may commence in the Federal Circuit court but issues arise that deem the matter complex, meaning the matter will be transferred to the Family Court. Once transferred between courts, a matter does not ‘skip the queue’ of matters awaiting court dates. It is allocated a date alongside all other matters filed in court that day, irrespective of the matter having been in the court system for months already. With over 1,200 matters transferred between the two courts each year, the consequence is a delay in the progression and resolution of matters and invariably a ‘double up’ in legal fees.
Attorney-General Christian Porter says the merging of the two courts will “remove the red tape that drags out complex trials and will have the potential in time to allow up to an extra 8000 cases to be resolved each and every year.”
The merger will also result in there now being one set of court rules and unified practices and procedures in place, making it not only easier for the increasing number of self-represented litigants that appear before the courts every day, but providing more certainty as to possible court outcomes.
For confidential advice and assistance about your family law situation, contact Accredited Specialist in family law, Tuskeen Jacobs of Rostron Carlyle Rojas Lawyers at email@example.com or 07 3009 8444.
If you’ve found yourself in the midst of a separation or divorce and are having difficulties with your ex-spouse agreeing on parenting issues or child custody, this article will give you a brief summary of how a court decides how a child spends time with each of their parents.
If, however you don’t have any disagreement, then there is no need for a court to be involved and you can create a parenting plan that suits both you and your ex.
As a starting point, there is a statutory presumption of joint parental responsibility. This presumption however, is rebutted when a court determines that this presumption is in conflict with the child’s best interests or family violence or child abuse is shown to exist.
If the presumption is not rebutted, then the court must consider whether a shared care arrangement is both in the best interests of the child and reasonably practicable.
Family Law, Best interests – Primary considerations for child custody:
The court will determine what is in the child’s best interests by giving weight to two primary considerations:
- the benefit to the child of having a meaningful relationship with both of the child’s parents; and
- the need to protect the child from physical or psychological harm from being subjected to, or exposed to, abuse, neglect or family violence.
Therefore, if there is family violence present, the court is primarily concerned with the need to protect the child, and is therefore not likely to consider that a shared-care arrangement is in the child’s best interests.
What are the other considerations taken into account by the court?
Family Law, Best interests – Additional considerations:
Additional considerations are used by a court to determine what is in the child’s best interests once the primary considerations have been examined.
The additional considerations listed in the Act are an in-exhaustive list of factors. They include:-
- views expressed by the child;
- the nature of the relationship of the child to the parent or other persons (including grandparents);
- the willingness of each of the parents to facilitate and encourage a continuing relationship with the other parent;
- the capacity of each of the child’s parents to provide for the needs of the child; and
any other fact or circumstance that the court thinks is relevant.
(CHILD CUSTODY) CASE EXAMPLE:
Recently a matter in which the father lived in Singapore and the mother in Australia was heard in the Family Court. There, the court deliberated in detail over the child’s best interests with regard to seeing his father, who had previously not been consistent in his visitations to see the child.
There was evidence of a gap of nine months in which the father had not visited his son, as well as evidence of visitation times that had been missed. The parents were not able to communicate effectively, and each of them was found to lack a facilitative and cooperative attitude to one another.
The court was satisfied that the presumption of equal shared parental responsibility (child custody) was in the child’s best interests as there was no evidence of family violence to rebut the presumption.
Despite the presumption of equal shared parental responsibility applying, the court drew on evidence from a Family Consultant (an independent third party observer) and the parties’ affidavits to decide that it was in the child’s best interests for the mother to have sole parental responsibility. The mother was to keep the father informed in relation to major long term decisions.
Factors that the court considered as important to this determination were:
- the father’s desire to spend time with his son;
- an opportunity turned down by the father to work in Australia and therefore be closer to his son, and the effect that this decision would deprive the child of a strong bond with his father;
- in the nine months that he did not visit the child, the father travelled elsewhere overseas, thereby proving his capability of travelling, but choosing this over his parental responsibility to the child;
- the Family Consultant’s recommendation for predictability and routine in the child’s life;
- the fact that the child would be accommodated in hotels or apartments instead of a familiar environment when staying overnight with the father in the future;
- If the father were to commit to seeing the child monthly, as proposed, this may not always be feasible due to work commitments interfering;
- the difficulty of a child to understand presence, absence and changes to their routine;
- if equal shared parental responsibility were to apply, this would provide fertile ground for conflict which, in the long-term, could be disturbing for the child.
We hope this had provided you with a brief overview and insight into the factors courts will consider when determining the child’s best interests in relation to parenting matters. This article in no way is a substitute for detailed legal advice and should not be used as such.
For a detailed application to your own circumstances, please call (07) 3009 8444 to make an appointment to see our Queensland Law Society Family Law Accredited specialist, Tuskeen Jacobs.
The Family Court of Australia does not regard the efforts of a spouse in building up a substantial business during a marriage or relationship as being any more important, significant or special in the determination of the split of the family assets.
The efforts of the other spouse who may have contributed to the relationship and the welfare of the family are considered in a different, but no less important, way by undertaking the role of home maker and parent who does the domestics and raises the kids.
In every case, the contributions and circumstances of each party must be carefully considered and assessed. All of the contributions made by each spouse are important in working out a fair split, so are the current financial and other circumstances of each party and their future needs arising out of their ending of the relationship.
However, the law makes it clear that the spouse who contributes all or most of the money or pays for the assets of the family through their business efforts (even in terms of million dollar or multi-million dollar incomes, assets and lifestyles) is not thereby entitled merely by that fact to any greater share of the family assets than the homemaker who raises the kids.
Rich and successful spouses often argue that “without my hard work, we would’ve had nothing” as a basis to contend that they should receive the lion’s share of the assets and the other spouse should get nothing or next to nothing for their efforts on the home front. This argument will not impress the Court.
To ensure that you get a fair and proper share of what has to be divided up when you separate, you should talk to one of our family law team members.
What happens to joint online accounts when your relationship ends?
As we have entered a new online age, couples that separate today are faced with more issues than ever before. In addition to deciding who gets which physical assets from the partnership, there are now online resources which must be separated, from a successful eBay seller account, to a list of contacts on a joint email address. There is also the issue of who receives access to cloud accounts, which can contain personal information and beloved family photos.
These online resources can be of substantial value, for example a large online movie and music collection, or membership to online clubs.
To avoid facing this issue, our recommendation is to keep your online profiles separate wherever possible when you enter into a new partnership, however should the need for an online property settlement occur, the process is much the same as a physical property division. Should your former partner not wish to cooperate in sharing and dividing the information and assets stored on joint online accounts, our team of family law specialists can assist you with this process.
Should you have any questions surrounding this issue, please contact our family law team.