If your work sees you involved in the world of high-stakes business or puts you at risk of bankruptcy, you may be concerned with how you can best protect your assets. Particularly an asset as important as the family home. One method of protecting assets is to make sure that they are not held in the name of the at-risk person, rather someone trusted, such as a spouse. But a recent judgment heard by the Full Court of the Federal Court will have a profound impact on the way accountants approach spousal assets.
The judgment held that a $4.5 million property acquired in the name of one spouse was in fact owned by both, equally. Below we discuss the ruling, its repercussions, and our advice on how you can best protect yourself and your family.
Mr. and Ms. Bosanac purchased a home in Dalkeith, Australia in 2006. They paid a $250,000 deposit with funds from a joint loan account in both their names and borrowed the remainder. Although both contributed to the purchase price equally, the property was transferred to Ms. Bosanac as the sole registered proprietor. Both Mr. Bosanac and Ms. Bosanac lived in the property up until they separated in 2015, after which Ms. Bosanac inhabited the property alone.
The property was used as collateral to acquire other investment assets. Pertinently, Mr. Bosanac used borrowed money secured by the mortgage to conduct share trading.
As a means to recover an outstanding debt owed by Mr. Bosanac to the Australian Taxation Office, The Commissioner of Taxation sought a declaration from the court that Ms. Bosanac, as the sole registered proprietor of the family home, held 50% of the beneficial interest on trust for her husband. The matter primarily centered around the question of whether Mr. Bosanac had an equitable interest in the residential property for $4.5million which had been registered solely in the name of Ms. Bosanac.
Ultimately, the Federal Court judgement held that the property was jointly owned, enabling the Commissioner of Taxation to make a claim on the family home for Mr. Bosanac’s unpaid taxes.
With the Commissioner of Taxation being successful in the second-highest court in Australia, this decision has significant repercussions in accounting. It overturns current asset protection methods used by accountants where an asset is held in a spouse’s name to protect against litigation and other claims against the at-risk spouse.
The case sets a new precedent for such matters. Based on the ruling, effectively this is the new law and the Commissioner of Taxation can be expected to enforce it in future cases. Clients in a similar position should immediately seek advice from their accountant on changes required to be made to their asset protection structures.
As accountants, we cannot give asset protection advice. Our expert legal team is on hand to help you ensure your assets are protected. But there are a few takeaways from this new Federal Court judgement for accounting. If your line of work puts your assets, including your family’s home, at risk, here are some things you may like to take into consideration.
Every situation is different, and there is no one size fits all approach to taxation planning and asset protection. Talk to our professional, approachable, and proactive Geelong Accountants to make sure you are best positioned to make the most out of taxation legislation, including investment-based tax-minimisation measures. If you want extra protection for your assets, seek advice from Hrkac Group Legal Services in Geelong, we have the experience to help you resolve any problems quickly, inexpensively, and with minimal stress.
Make an appointment today via contact us, or phone 03 5224 2366.