Newsletter
September 2014 Newsletter
Tax consequences following marriage break up
The ATO has recently released a taxation ruling on the tax effects of matrimonial money or property transfers. According to some commentators, the game-changing ruling may affect the manner in which property settlements are able to be arranged for family groups under s 79 of the Family Law Act 1975.
In Taxation Ruling TR 2014/5, the ATO confirmed that payments or transfers of property under Family Court orders to a husband or wife from a private company will be considered a distribution of profits from the company. Such transactions will therefore be assessed as dividends either pursuant to the ordinary dividend assessing provisions (s 44 of the Income Tax Assessment Act 1936) or Div 7A in almost every matrimonial property or cash settlement, regardless of whether the parties are shareholders (or associates of the shareholders) in the private company or whether the private company is a party to the Family Court order.
TIP: The rules can be complex and various different taxation consequences could arise depending on the type of Family Court order that has been made. Please contact our office if you have any questions.