Family Law: Family Law and Cheating Tax – It’s a No Go

In Family Law, the Court has the power to order the transfer of property between separated parties by way of consent orders. In such circumstances, the parties may be exempted from the stamp duty which is normally required upon the transfer of property. This also applies to binding financial agreements (Read more in our article “Signed, Sealed, Delivered and Stamp Duty”).

 This exemption for stamp duty potentially opens up a whole new world, causing many people to ask – Is it possible to use this exemption in Family Law to avoid stamp duty in other situations, even if you are not actually separating or separated?

 Consider a situation where a young couple have bought a property. The property is currently in one party’s name and they wish to transfer it to the other party’s name due to the tax and mortgage benefits they may receive from doing so. This couple thinks that it is possible to transfer the property and avoid stamp duty through the Family Law system.

 Now, since they do not want to separate, they cannot seek Consent Orders from the Court because they require that the parties are separating with no likelihood of getting back together. However, could the potentially use a binding financial agreement? After all, a binding financial agreement is a document entered into usually by separating parties stating who gets what property. It is not looked at by the Court.

 Simply put, no – this couple cannot use a binding financial agreement to avoid the payment of tax in a property transfer where the relationship remains intact because binding financial agreements are not a get out of jail free card. The requirements to avoid stamp duty through a binding financial agreement are even more stringent since you must demonstrate that you have just and equitable reasons to be exempted.

  Similarly, if this couple were married, the Courts powers to make orders in when the parties’ marriage is ‘intact’ is limited unless there is a just and equitable reason for the stamp duty exemption to apply.

 This would not change if the couple were in a de facto relationship. The Court has no jurisdiction to make any orders in relation to intact de facto relationships –the Court cannot do anything and therefore the tax exemption would not apply.

 Under the law a financial agreement made during a marriage or a binding financial agreement requires a breakdown in the relationship to occur for the agreement to come into play.

 The Court has previously refused to make Consent Orders in an intact marriage to transfer property between the parties for the purposes of avoiding stamp duty as there was no ‘principled reason’ or it was not just and equitable for the Court to do so. The Courts approach to Consent Orders may also be applied to binding financial agreements.

 If you have a family law matter, concerns about your family business or questions about family law and separation in NSW and want to find out more please do not hesitate to contact us on 9688 6023 or email us at info@franklegal.com.au.

This article is provided to the reader for general information. It is not legal advice. It was written by Andrea Spencer & Emily Graham and edited by James Frank.

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