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Asset Protection

Asset Protection: Significant change associated with putting assets in spouse’s name

A common Asset Protection strategy is for “at risk” people to put their family home (or other assets) in their spouse’s name.

In the recent case, Commissioner of Taxation v Bosanac [2021] FCAFC 158  the judgment held that a $4.5 million property acquired in the name of one spouse was effectively jointly owned 50/50 and therefore available to satisfy the creditors (ATO) of the other spouse even though their name wasn’t on the Title Deed.

The matter revolved around Mr and Ms Bosanac, who purchased a home in 2006. They paid a $250,000 deposit with funds from a pre-existing joint loan account in their joint names, and borrowed the remainder to acquire the property in Dalkeith, Australia. The property was then used as collateral to acquire other investment assets.

“Despite contributing to the purchase price equally, the property was transferred to Ms Bosanac as the sole registered proprietor. Both Mr Bosanac and Ms Bosanac lived in the property until their separation in 2015, after which Ms Bosanac resided there alone,” a statement from law firm Bennett & Co explained.

“Relevantly, the Bosanacs borrowed further money secured by the mortgage, which was then used by Mr Bosanac to conduct share trading.”

“The Commissioner of Taxation [then] sought a declaration that Ms Bosanac as the sole registered proprietor of the family home, held 50 per cent of the beneficial interest on trust for her husband. In this case, the Commissioner sought the declaration as a means to recoup an outstanding judgment debt owed by Mr Bosanac to the Australian Taxation Office.”

Ultimately, the Full Court of the Federal Court judgement held that the property was jointly owned thereby “enabling the Commissioner of Taxation to make a claim on the property for unpaid taxes” incurred by Mr Bosanac.

This decision has serious implications as putting assets in a spouse’s name has been a commonly used asset protection strategy for decades.  This case sets a new precedent for such matters going forward although an appeal hasn’t been lodged yet.  In the meantime, we expect the Commissioner of Taxation to utilise it.

It is therefore critical for any “at risk” person who is using this Asset Protection strategy to talk to their accountant about reviewing and updating their strategy and asset ownership structures. 

Give us a call to discuss the implications and options for you in more detail.

Source: https://www.accountantsdaily.com.au/tax-compliance/16359-a-shock-to-the-system-federal-court-spousal-asset-ruling-to-impact-accountants

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