Taxation is a very complex and volatile area of law and taxation laws can have a profound impact on the division of assets in family law matters. Without a good understanding of taxation law, the Australian Taxation Office (ATO) could potentially be a substantial beneficiary of the dissolution of a marriage.
An example of this is when one party owns a company and they reach an agreement that the company transfer property or funds to the other party. Division 7A of Income Tax Assessment Act 1936 (“the Act”) provides that a payment of money and a transfer of property by a company to an associate of a shareholder can be taxed as a dividend. However up until recently if the company was joined as a party to the proceedings s 109J the Act applied to exempt the payment.
However, in 2015 the ATO reversed its position in relation to payments by a private company to an associate of a shareholder pursuant to Family Court orders. Therefore as the law currently stands, payments made by the company would be assessable income for the receiving party and a transfer of property would be regarded as a dividend of an amount equal to market value under Division 7A.
At KPL Lawyers we have a dedicated team of family and corporate law specialists who can help you by breaking down complex legal positions and provide you with easy to understand options so that you can achieve a better outcome.
