Tax Issues in Family Law Property Settlements
DISTRIBUTING THE SPOILS ¾ THE DIFFERENCE BETWEEN HACKING AND
CARVING
(Updated to 20 February
2013)
An A5 sized hard copy booklet format is available for
ready reference. For copies ($10.00 including GST) please email peter.szabo@mk.com.au
Further (and in fact essential) reading is the very comprehensive article by Queensland's Hopgood Ganim lawyers Alison Ross, (Family Law) and Luke Mountford (Business Services), dated 19 August 2006. It is entitled "Practical issues in property settlement matters: Tax and accounting for the family lawyer. The paper examines how the Family Court deals with the issues summarised below in considerable detail. Case law is provided for those interested in burrowing even deeper.
Family lawyers involved in financial matters are really undertaking forced estate planning. As such, they and the financial experts also involved need to come to grips with the full ramifications of their work in this regard.This paper covers the strategies that need to be understood by family lawyers when negotiating a family law property settlement or formulating orders to be made by the Family Court. Accountants and financial planners may also find this paper of assistance when creating a financial plan for their clients. With care, the inevitable financial loss to both parties can be kept to a minimum, and unwanted revenue expenses can be avoided. For example, transfers of real estate pursuant to Binding Financial Agreements under Section 90 of the Family Law Act did not attract CGT rollover relief until 12 December 2006. This is despite an announcement in the May 2005 Federal Budget that they would. Royal assent was slow in coming. Failure to take such issues into account can have disastrous consequences for the client, with a corresponding negligence action against the professional adviser.
This article was first published in booklet format at the Australian Family Lawyer's National Convention in October 1998, and is being constantly revised and updated. Television Education Network has produced several videos and audios based on this article. I am grateful to the help I have received from Allan Swan and Wendy Quay of Moores Legal and Michael Flynn, Barrister (Victorian Bar) for their input on tax issues.
WARNING: This publication is intended as a guide only to when further expert tax, accounting or financial planning advice is needed. Every case is different, and different fact situations can impact substantially on what otherwise might be a straight forward case. It is trite to say that our tax laws are complex. As indicated, what follows is designed to prompt you to take care in what you are doing when you restructure your client's assets during a divorce.
Peter
Szabo
Principal
M+K Lawyers
20 February 2013