‘A shock to the system’: Federal Court spousal asset ruling to impact accountants
A recent judgment heard by the Full Court of the Federal Court will have a profound impact on the way accountants approach matters concerning spousal assets.
The matter of Commissioner of Taxation v Bosanac [2021] FCAFC 158 was heard recently with the judgment holding that a $4.5 million property acquired in the name of one spouse was jointly owned 50/50.
The matter revolved around Mr and Ms Bosanac, who purchased a home in 2006. They paid a $250,000 deposit with funds from a pre-existing joint loan account in their joint names, and borrowed the remainder to acquire the property in Dalkeith, Australia. The property was then used as collateral to acquire other investment assets.
“Despite contributing 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 until their separation in 2015, after which Ms Bosanac resided there alone,” a statement from law firm Bennett & Co explained.
“Relevantly, the Bosanacs borrowed further money secured by the mortgage, which was then used by Mr Bosanac to conduct share trading.
“The Commissioner of Taxation [then] sought a declaration that Ms Bosanac as the sole registered proprietor of the family home, held 50 per cent of the beneficial interest on trust for her husband. In this case, the Commissioner sought the declaration as a means to recoup an outstanding judgment debt owed by Mr Bosanac to the Australian Taxation Office.”
Ultimately, the Full Court of the Federal Court judgement held that the property was jointly owned thereby “enabling the Commissioner of Taxation to make a claim on the property for unpaid taxes” incurred by Mr Bosanac.
Timothy Munro, founder of award-winning compliance advisory app ChangeGPS said the decision represents a significant outcome.
“This one decision upends a lot of existing asset protection used by accountants for decades where an asset is held in the spouse’s name to protect against litigation and other claims against the ‘risk spouse’. With the Commissioner being successful in the second highest court in Australia, this decision is a shock to the system,” Mr Munro said.
Succession, Asset Protection and Estate Planning Advisers Association (SAPEPAA) chairman, Grant Abbott echoed a similar sentiment.
“The Full Federal Court looked at the earlier decision where the primary judge held that the presumption of advancement applied such that Mr Bosanac was to be seen to have advanced his interest in the property to his spouse,” he said.
“However not to be swayed the Full Federal Court said on the objective facts this was not the case, rather the spouse Ms Bosanac held 50 per cent of the property on trust for Mr Bosanac.”
Going forward, Mr Munro said the case will set a new precedent for such matters.
“We are not sure whether there will be an appeal to the High Court as the Full Federal Court used High Court precedents on advancement and resulting trusts to make their decision. So it looks like this is the new law and expect the Commissioner of Taxation to enforce it,” he said.
“It is time for accountants, who have clients in this position to immediately offer reconstructive advice for clients impacted. To help accountants Change GPS is presenting a solution, complete with ways to talk to clients about changes needed to their structures.”
Source: AccountantsDaily