The High Court of Australia has ruled that a tax debt of one spouse can now become the tax debt of the other spouse during divorce property settlement proceedings.
During the marriage the wife accrued a tax debt of $250,000. On separation the wife then applied to the Family Court for Orders that the debt be moved to the (bankrupt) husband.
The Full Court said that s90AE (1) of the Family Law Act provides the Court with the power to order the Commissioner of Taxation to substitute the husband for the wife as the person responsible for the debt.The Commissioner of Taxation appealed this decision to the High Court of Australia and the High Court upheld the decision. The ‘Tax Man’ may now be out of pocket for the $250,000, given the husband is bankrupt. (Commissioner of Taxation v Tomaras [2018] HCA 62)

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