Family Law Courts have far-reaching powers to refer allegations
of tax evasion to the relevant authorities. Warring spouses should
be extremely cautious before raising these allegations
unnecessarily within the context of their family law
Secrets are often shared freely between bed fellows however upon
a bitter marital dispute, private matters can quickly become public
The raising of allegations of tax evasion and/or fraud within
proceedings arising from the breakdown of a marital or de-facto
relationship can have wide ranging consequences and
Where allegations are made by one or both parties during court
proceedings which identify breaches of Commonwealth Laws the court
is entitled (and on one view it has a positive duty) to bring the
breaches to the notice of the relevant authorities.
One such ramification arises in circumstances where one party
makes allegations in relation to the other party having committed
tax evasion. The applicable case law states that it is not
necessary that there is a solid finding that the fraudulent conduct
or tax evasion has occurred and prima facie evidence that it may
have occurred (ie. the untested allegations of one party) is
sufficient for the court to refer the matter to the Australian
Taxation Office (ATO). This may result in a lengthy adjournment
pursuant to the provisions of s79(5) of the Family Law Act until
the conclusion of any investigation by the ATO so that the
liability (if there is one) can be quantified. If tax indeed needs
to be paid, then the tax and any penalties may be deducted from the
pool of assets available for distribution between both parties,
even if the party who raised the allegations had no knowledge of
the alleged tax evasion and/or fraud at the time.
WHAT SHOULD YOU DO IF YOU HAVE CONCERNS IN RELATION TO THE
LEGALITY OF YOUR FORMER PARTNER'S CONDUCT?
Given the very serious ramifications, it is best to take
specialist legal advice in relation to how, if at all, such
concerns should be raised within the context of your family law
proceedings. You should also ensure that consideration is given to
whether appropriate protection, such as mutual indemnities, should
be included in any settlement which is reached out of court.
If you are doing a Will, or you are the executor of a deceased estate, consider what taxes and duties could be payable.
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