Taxation Consequences of Family Law Asset Transfers

The Federal Court warns that it is extremely important for parties in family law proceedings to strictly comply with the terms of Court Orders if they hope to benefit from any tax breaks or exemptions that transfers under family Orders attract.

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As was discussed in a previous article about capital gains tax and the case of Sandini v Ellison [2018], care needs to be taken when giving effect to transfers of assets under either Family Law Property Orders or a Binding Financial Agreement. In Sandini v Ellison, the Court made clear that strict compliance with the terms of Property Orders was necessary – this means the transfer of the property must occur as and how stated within the Court Order.

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In Sandini v Ellison, the Court orders stated that the shares in a company were to be transferred to the Wife’s sole name. The transfer in this manner attracted capital gains tax when she was to later sell the shares. If however, the Court orders stated that the shared in the company were to be transferred to a trust held by the Wife there would have been no stamp duty payable. The Court took the view that the Commissioner of Taxation is not obliged to look behind transactions to ascertain whether a transaction was intended to be in fulfillment of Family Law Property Settlement Orders if the transaction itself did not strictly comply with the Orders.

At Argent Law, not only is our experienced family law team knowledgeable about the Capital Gains Tax implications, primary residence exemptions, stamp duty exemptions and any other taxation consequence of family law asset transfers – but we also have the benefit of input from James Patterson, Director and Accountant of our sister company, Argent Accounting, when it comes to interpreting and applying tax legislation for the benefit of our family law clients. So, if you have a family law matter, and you want to be knowledgeable and confident regarding the taxation consequences of the asset transfers to be made under your family law property settlement orders, please don’t hesitate to call Argent Law on 03 9571 7444 today!

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