Australia: How delays in the Family Court can impact your business

Delays in the Court system have attracted some media attention in recent months. The Family Court system is widely acknowledged to be one of the most overcrowded court systems in Australia; with two judicial positions from the Federal Circuit Court and one from the Family Court remaining vacant, and a further six judges expected to retire within the next year.

These delays have, and will continue to have, significant, and often adverse, impact upon businesses that are drawn into Family Law proceedings, such as pending time and assets complying with Court Orders.

In the event that interest in a business becomes part of a Family Law dispute, full and frank disclosure can be sought. We have written before about disclosure obligations concerning your personal financial circumstances in Family Law proceedings - the same is true for businesses. With Family Law proceedings now taking up to three years from start to finish, obligations to provide up-to-date disclosure can place a significant strain on your staff and resources. Businesses involved in a Family Law matter are expected to disclose the following:

  • Tax returns
  • Financial circumstances
  • Bank accounts
  • Inventory
  • Invoices

The Court takes these obligations very seriously. In 2014, in the matter of Shaw & Shaw, the husband was awarded only 5% in the property settlement. When he appealed this decision, the Court found that he had "failed in any meaningful way or at any reasonable level, to comply with his obligation of full and frank disclosure" so the property division accounted for the lack of disclosure provided. This case illustrates why it is so important that business owners and accountants understand these obligations, and know what information is necessary to provide in order to prevent unnecessary expenses and any future litigation.

Interests that a person has in a business may also impact upon any Orders that are made for spousal maintenance. Spousal maintenance is an Order for scheduled payments aimed at making sure that a spouse isn't financially disadvantaged as a result of the separation. For more information on spouse maintenance, see Malcolm Gittoes-Caesar's article 'Spouse Maintenance - Am I entitled to it, or will I have to pay it?'

If the Court grants Orders for spousal maintenance, it can now extend far beyond the length of the trial, and involve a serious long term obligation for one party to assist in maintaining the other. This has had, in our experience, an adverse impact upon businesses that are involved in the proceedings. This can lead to monies being drawn out of the business involved, and, consequently, tax implications.

It's very difficult to alter spousal maintenance orders, and involves an application to be made to the Court so you need to consider these issues before any Orders are made, and before the first day of court.

It is therefore important that you speak to a lawyer, not only in relation to Family Law matters, but to ensure that the right tax structure is implemented, and to ensure that any monies that are required to be paid to the other party by way of spouse maintenance, don't have a significant adverse impact upon personal and business assets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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