Sunday 31 August 2014

Planning

Whether you were the one who decided to separate or not it is important to establish whether you can actually survive financially after separation. Here are some important financial considerations that you should consider.

From a day to day point of view, you need to ensure you have a bank account and if necessary a credit card in your own name (not a supplementary card). Also your own email address and mobile phone (not linked to your spouse).

The household spending for a couple and two children is actually not that much different to that of a household where there is one adult and two children, even where the children spend time with both parents. Do a budget and start thinking about what your priorities are as far as spending is concerned. An understanding of your spending habits is vital when considering your property settlement.

If children are involved you may receive or pay child support payments. If you are to receive such payments, this may help towards your expenses but it is still important to do a budget as circumstances may change - such as job loss for the paying parent. The Child Support Agency has a useful calculator to work out what you may receive/pay. It is important to remember that child support generally only applies to children under the age of 18 so if you have adult children living in your home it is unlikely you will receive any child support payments for them.

Government payments or subsidies may be available.  To be eligible you must satisfy Centrelink’s merit, income and asset tests but with some smart financial planning strategies you can maximise the amounts you do receive.

While considering day to day expenses is important you also need to think about long term planning and in particular setting yourself up for retirement.  Obtaining good financial planning advice goes a long way to financially recovering from separation. Such advice should be obtained prior to finalising your property settlement - so that it can be best structured for long term planning.


You should review your wills, enduring powers of attorney, insurance and your superannuation to ensure you update your beneficiaries. 

Wednesday 27 August 2014

Family Law Council report on "parentage"

Recently the Family Law Council of Australia's "Report on Parentage and the Family Law Act" was released by the Attorney-General. The Council was asked to prepare the Report in light of the increasing diversity of family formation in Australia and the rapidly changing nature of reproductive technology.

In the Report the Council considers the role and meaning of "parent", who is considered to be a parent of a child under the Family Law Act, and the inconsistent, inappropriate and discriminatory outcomes for children on the basis of the status of the people who are raising them.

The Council made nineteen recommendations (summarized):
  • One: The Government should conduct a comprehensive revision of the decision making provisions of the Family Law Act to ensure that it provides a consistent approach to decision making for all children regardless of their family form.
  • Two: The reference to ‘both’ of the child’s parents should be removed from s 60B(1) and s 60CC(2)(a) of the Family Law Act. In addition, where the word ‘parent’ appears elsewhere it should be amended to include a reference to ‘other significant adults’ or ‘other people of significance to the child’ where appropriate.
  • Three: The definition of parent in s 4 of the Family Law Act should be amended to make it clear that the term parent is inclusive and not limited to parents recognised under the law.
  • Four: In determining the best interests of an Aboriginal child, s 60CC(3)(h) of the Family Law Act should be amended to include ‘the child’s right to enjoy his or her Aboriginal or Torres Strait Islander culture (including the benefit to that child to enjoy that culture with other people who have the responsibility to pass on that culture).’
  • Five: Part VII of the Family Law Act should make specific provision for the making of orders in favour of one person or more than two persons where that supports the child’s best interests.
  • Six: The Government should introduce a federal Status of Children Act that includes power to make orders about the status of children and legal parentage for the purpose of all Commonwealth laws.
  • Seven: The Standing Council on Law and Justice should consider further state, territory and Commonwealth cooperation on harmonising parentage laws nationally.
  • Eight: Section 60H of the Family Law Act (artificial conception procedures) be consistent in its approach to single and couple parents and with state and territory laws in this area that make provision about the parental status of donors of genetic material.
  • Nine: Section 69U of the Family Law Act be amended to make it clear that the presumptions can be rebutted by other provisions in Part VII Family Law Act.
  • Ten: The Government should seek a referral of power from South Australia consistent with the referrals from New South Wales, Queensland, Tasmania and Victoria which provide that the family courts may make a determination of parentage.
  • Eleven: The Government should consider amending s 69W of the Family Law Act to make it clear that the court may consider the best interests of the child when deciding whether to make a parentage testing order.
  • Twelve: The new federal Status of Children Act (Recommendation 7) should contain provisions specifically dealing with applications for 'transfer of parentage' in surrogacy cases where state and territory Acts do not apply.
  • Thirteen: The provisions in the new federal Status of Children Act dealing with the transfer of parentage in surrogacy cases where state and territory Acts do not apply should contain a set of minimum requirements including the following:
    • That any order is subject to the best interests of the child;
    • Provision is made for when the parties change their minds;
    • Evidence of the surrogate mother’s full and prior informed consent;
    • Evidence of the surrogacy agreement, including any sums paid;
    • Consideration should be given to whether the intending parents have acted in good faith in relation to the surrogate mother;
    • Evidence of the intending parent/s actions in relation to ensuring the child will have access to information concerning the child’s genetic, gestational and cultural origins;
    • Provision is made that where a surrogacy arrangement involves multiple births, orders must be made in relation to all children born;
    • The legality of the surrogacy arrangement should be a relevant consideration for the court when determining parentage.

  • Fourteen: Section 60H of the Family Law Act (artificial conception procedures) should be amended so that it is clear it does not apply to surrogacy arrangements.
  • Fifteen: Section 60HB of the Family Law Act should be retained (in some form) to recognise state and territory orders that transfer parentage in domestic surrogacy arrangements.
  • Sixteen: The Government should pass amendments to:
    • Clarify whether the court has power to authorise the taking of a sample from a child without the consent of a parent.
    • Amend s 69ZC of the Family Law Act to make it clear that a non-compliant parentage testing report may be admitted into evidence if the court is satisfied it should be.

  • Seventeen: The Australian Law Reform Commission conduct an inquiry into the full range of issues raised by international surrogacy and its impact on Commonwealth laws.
  • Eighteen: The Government should pass separate legislation to enable the family courts to transfer parental status to Torres Strait Islander receiving parents.
  • Nineteen: Birth registration be reviewed and that consideration be given to harmonisation of records so that one search can track births (deaths and marriages) in all states and territories.


The Report can be found at www.ag.gov.au/FamiliesAndMarriage/FamilyLawCouncil/Pages/FamilyLawCouncilpublishedreports.aspx.

Tuesday 12 August 2014

Tax ruling change - potential significant impact on property settlements

At end of financial year the Australian Tax Office issued a final public ruling that provides that payments from a private company to a spouse in accordance with a Family Law Courts order are now to be treated as a deemed dividend and subject to personal income tax. Previously these payments, per earlier practice and many private rulings from the ATO, were treated as tax free payments to the spouse receiving the money.

This is a considerable policy change impacting on those couples whose property includes family companies. Indeed the ruling from the ATO notes a reversal of a "significant body" of previous private rulings and a general practice.

Additionally, it is arguably contrary to other tax breaks that are available for separating couples, such as stamp duty exemptions and capital gains tax rollover relief.

Business advisers have been quoted in news articles (such as in the Australian newspaper and the Australian Financial Review last week) as saying that the change could mean that people are unable to retain their businesses as they are required to come up with more money to make up the difference to their former spouse and to do so they will have to sell the business.

Whether that will occur or not will depend on the circumstances of each case but what is going to occur is that parties to family law proceedings will need to carefully consider whether non-company assets should be divided in a different manner in order to achieve a better tax outcome. But there are some matters where almost all of the assets that the parties "own" are held by a company and such an option will not be available. In those cases, accountants will need to determine the tax implications and costs of splitting the assets so parties know what the net outcomes will be.

If there is extra tax payable it will need to be taken into account when determining a just and equitable outcome between the parties with the result that the parties are dividing less than they previously would have been.

In some circumstances, where a spouse does wish to retain the company and its assets, it is also possible that company restructures will be necessary resulting in complex tax arrangements being undone in order to try and achieve an equitable result.


Some commentators are calling for government intervention - legislation to overturn the ATO's ruling. It will be interesting to see if the government responds.