Accountants in Sydney and the Impact of ATO’s Court Case (ATO vs Bosanac)
For many years, it has been a prevalent and cost-effective approach to safeguard the family home by having it registered under one partner’s name in a marriage, typically the low-risk non-company director or non-business operator. This tactic is commonly employed by accountants in Sydney.
The ATO have tested this strategy in a recent court case (ATO vs Bosanac). Unfortunately, for majority of the individuals especially accountants in Sydney, the outcome was unfavorable as the ATO eventually gained access to the asset, even though it was in the hands of the partner that did not owe anything to the ATO.
The facts were as follows:
- Mr and Mrs Bosanac borrowed money to purchase the family home;
- Mrs Bosanac was the sole registered owner of the property;
- Mr Bosanac owed the ATO $9 million plus costs, and,
- The ATO applied to the court to recover this sum from Mr Bosanac’s purported interest in the property owned by Mrs Bosanac, which the ATO claimed was 50% of the available equity.
The ATO’s argument was:
- The presumption of resulting trust; (i.e. where someone buys a property in someone else’s name and the other person does not contribute to the cost, or 2 people buy the property jointly, but the property is put into one person’s name, or 2 people buy jointly, but with unequal amounts of money); and,
- That there was no intention by the purchaser to gift their contribution to the other person. It was therefore presumed that the purchaser’s benefit was to be held in trust by the other person.
The Bosanac’s argument was:
- The presumption of advancement; (i.e. in a marriage, it can be presumed that a purchaser’s contribution is intended as a gift to the other party).
The ATO then argued:
- Evidence of the actual intention; (i.e. the presumption of the advancement could not be applied to the matrimonial home if both partners live in it, as the intention would be to own the property equally).
The Federal Court held:
- That although outdated regarding the modern status of women and property ownership, the presumption of advancement still applies to married women and the matrimonial home in Australian law; and,
- The ATO could not provide sufficient evidence to ignore the presumption of advancement.
The ATO, therefore, lost in the Federal Court and then appealed to the Full Federal Court, where it was held that:
- The ATO’s appeal should be allowed, and the orders of the Federal Court should be set aside; and,
- The (former) wife, the sole registered owner, did hold 50% of her interest in the property, on trust for her (ex) husband.
This case implies that it is no longer adequate asset protection to own the family home in one spouse’s name, where the other spouse undertakes the risk without establishing clear evidence of the gift from one spouse to the other. This evidence could include a loan in the owner’s name, repayments by the sole owner and documentation to explicitly record the gift.
As with all asset protection strategies, you should obtain expert advise from accountants in Sydney before deciding about the asset’s owner and any gifts of property.
If you need expert advise from accountants of Sydney, or want to discuss the effect of this case on your specific circumstances, please contact us.
Author – Zane Grigg
*Correct as of 16 December 2021
*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek specific advice relating to your particular circumstances. Liability is limited by a scheme approved under professional standards legislation.
