Family Court bungle hits de factos as error throws property settlements into doubt

23 February 2012 By

Thousands of Family Court orders relating to de facto couples, including property settlements and maintenance agreements, have been cast into doubt by a major federal government blunder.

Family Court and Federal Magistrates Court bungle

The government neglected in 2009 to arrange for the Governor-General to proclaim a start date for legislation that handed power to the Family Court to handle property and maintenance disputes between de facto couples. The mistake, which Attorney-General Nicola Roxon last night labelled an “unfortunate administrative error”, means all such property and maintenance orders by the Family Court and Federal Magistrates Court between March 2009 and February 11 this year are now uncertain.

Ms Roxon said the government was working to fix the issue as soon as possible, but the opposition seized on the blunder as an “astonishing act of incompetence” that reinforced the view that the government could not get anything right.

Previously, heterosexual and same-sex de facto couples had their property matters dealt with by the state courts.

In 2009, the states referred their powers to the commonwealth, for the first time enabling de facto couples to have their property disputes dealt with by the Family Court as married couples do. However, no start date for the proclamation was arranged.

It is understood this oversight occurred within the Attorney-General’s Department, when Robert McClelland was attorney-general. This meant the changes failed to begin.

The result is that since 2009 the Family Court has been making orders relating to de facto couples for which it had no jurisdiction.

Ms Roxon said she had directed her department to put its full attention to fixing the problem as quickly as possible. “This is a very unfortunate administrative error where a small mistake can have extensive consequences,” she said.

The blunder was detected only earlier this month during Family Court proceedings in Melbourne. The case was adjourned until the issues with the legislation could be resolved.

A proclamation by Governor-General Quentin Bryce was rushed through on February 9 and the changes to the laws finally took effect on February 11.

This means that any orders made from February 11 cannot be challenged.

However, any orders made between March 1, 2009, and February 11 this year are potentially invalid because the Family Court did not have jurisdiction to make them.

The chairman of the family law division of the Law Council of Australia, Geoff Sinclair, said the Family Court and Federal Magistrates Court were trying to ascertain how many cases were involved, but he believed they were in the thousands.

“We are looking to see whether there can be retrospective legislation to deal with those cases . . . I think that is certainly doable” Mr Sinclair said. “We are urging the Attorney-General to take whatever steps are necessary, as soon as possible, to make sure legislation is enacted.”

He said about 90 per cent of family orders were made by consent so he hoped they would not be challenged by the parties.

“It doesn’t matter whether parties are in a de facto relationship or a marital relationship; when the relationship breaks down there’ll often be a lot of emotion from both sides” he said.

“We certainly don’t want a position where people have to go back and revisit issues that have occurred in the past, when hopefully people have put things behind them.”

Opposition legal affairs spokesman George Brandis said: “This is an astonishing act of incompetence at the heart of government. It reinforces every impression the Australian people must already have that this government cannot get anything right.”

However, it is understood a similar oversight occurred under the Howard government in 2006 when the Family Law Act was amended to give the Family Court jurisdiction to consider appeals from family law magistrates in Western Australia.

A proclamation was made to fix this oversight. Senator Brandis said the opposition would support legislation to fix the current problem.

Former Family Court chief justice Alastair Nicholson said the oversight was serious: “If those settlements are called into question, it’s obviously very significant for the people involved.

“It seems the government has no real choice but to pass legislation retrospectively approving them.”

NSW Attorney-General Greg Smith said it was disappointing the federal government had failed to deliver the reforms properly.

(Source: Nicola Berkovic, The Australian, 22/12/2012)

About Rushmore Forensic

Andrew Firth is a director of Rushmore Group. He has conducted numerous investigations and other forensic accounting engagements in Australia, Singapore, the UK, Thailand, Hong Kong, Vanuatu, and the USA.

He specialises in assisting people going through divorce and providing other forensic accounting services for commercial disputes.  He is a member of the Institute of Chartered Accountants and has appeared as an Expert Witness in numerous jurisdictions.

Filed Under: Family law, Property Settlement Tagged With: , ,

What assets are commonly missed when a property settlement is being determined?

6 October 2011 By

When it comes to detailing the marital assets and liabilities, many people forget to include small business ventures.

You may have a home business, internet business or other venture that generates income. These businesses need to be valued and included in the joint assets and liabilities. Valuing a business of this type will always involve a degree of judgement and we recommend that a valuation be conducted. It can be surprisingly how often the value of a business can represent a large component of the net marital assets.

If you are currently separated, it’s important to try and obtain copies of as much documentation as you can in relation to these types of businesses. Examples include: bank statements, invoices, BAS Statements, Financial Statements and other correspondence. The documentation will assist in the preparation of a valuation.

If your divorce ends up in Court then the valuation can be used as evidence of the value of the business, or more commonly it will assist you and your ex partner in coming to a negotiated settlement.

If you would like more information about valuing a business as part of a property settlement then please contact us for an obligation free discussion.

Filed Under: Family law Tagged With: , , , ,

Binding Financial Agreements

7 April 2011 By

In Australia, there are three ways that a property settlement can occur:

1. An informal settlement: this is where the two parties agree amongst themselves on how the property should be split. This may or may not involve any paperwork or contractual arrangements.

2. Orders under the Family Law Act (“FLA”): The FLA applies to all people who are legally married and the marriage is recognised in Australia.

3. A Binding Financial Agreement: This is a legal agreement signed by both parties, under which both parties contract out of the FLA and enable a property settlement to take place.

A binding financial agreement is a technique that you can use with your partner to divide the joint marital assets. Before you enter into such an agreement, it’s important to consult a divorce lawyer to advise you on entering into such an agreement. It is a relatively new area of the law and there have been cases where binding financial agreements have been set aside by the Court.

If you are entering into a binding financial agreement or seeking orders in relation to a property settlement, and you or your partner own a business then it’s also important to obtain expert accounting advice to value the business and ensure that the property settlement does not result in paying excessive tax that could otherwise be minimised. A valuation for a business can have a significant impact on the overall assets available for property settlement and it’s therefore critical to obtain expert financial advice. In most cases, a forensic accountant familiar with the family law / divorce process will be able to assist you with these matters. We find that the cost of the advice is outweighed by the additional benefit flowing to the client.

There is no requirement for court approval or registration of a financial agreement, however both parties must have independent legal advice prior to its execution. A certificate of independent legal advice that is required to be annexed to the financial agreement must canvass two matters in relation to the party advised. This includes “the effects of the agreement on the rights of the party” and “the advantages and disadvantages, at the time that the advice was provided”.

Spouses may enter into a “termination agreement” that ends the earlier financial agreement entered into. Both parties must have  independent legal advice prior to the execution of a termination agreement.

About the Author

Andrew Firth is a forensic accountant based in Sydney. He is a Director of Rushmore Group and specialises in financial reconstructions, money tracing, divorce, and other forensic accounting engagements.

To arrange an appointment, contact us today.

Filed Under: Family law Tagged With: , , ,

Need help with Asset Searches?

7 April 2011 By

If you are searching for the assets of an individual, company or other structure then you have come to the right place. Rushmore Forensic is comprised of specialist forensic accountants and investigators who may be able to assist you.

The exact approach employed when conducting an asset search will vary depending on the circumstances, however below is a ten step checklist which may assist you with your enquiries.

1. What information do you have to begin with? If you have an individual’s name then it will be useful to find any other information about them, such as their address. This can be done by doing a search on the online Whitepages. Alternatively you could use another online database such as an Electoral Roll search or at the other end of the spectrum; you may employ a private detective to follow the individual to a particular address. Always ensure that you use a reputable investigator and stay within the law. This will ensure that any information relating to your asset search can be admissible as evidence at a later date in Court.

2. The address. Once you have the relevant address, you can perform a property search with your state or territory’s Land Titles Office. If you have the physical address, you can perform a search and obtain the Folio Identifier of the property. Once you have the Folio Identifier you can then perform a Title Search on the property and determine the owners of the property.

3. Securities Commission Searches. Personal extract and Company extracts are commonly used when compiling information about an entity for an asset search. These types of searches can be performed online for a small fee and can provide useful investigative information for further enquiries.

4. Email records. Email can be a very valuable source of information. Provided you have accessed the email legally, it can lead directly to the relevant asset you are looking for. If you suspect that the asset is located overseas, then direct your search to emails from these types of email accounts. Scan the list of folders and see if you can identify any other useful information. Folders with the name “Personal” or similar names can often provide valuable investigative information.

5. Google. Often overlooked when conducting an asset search, a search on Google using different strings of key words can often reveal the information you are looking for. If you suspect that an individual has say purchased an overseas tourist property, you could search for “john smith bali resort”. Google regularly caches all the information on the net and it’s surprising what can be found using this free online tool.

6. Travel History. Do you have any other background information about an individual such as where they grew up and where they frequently holiday? This can lead you directly to an overseas city. Depending on how developed the country is and the legal system in that country, you may be able to perform both online searches or use a private investigator to obtain the relevant information.

7. Other Technology. Whilst it may be inappropriate (or illegal) to use in some circumstances, there are limited situations where a GPS locator can be placed on an object, such as a car that you own to monitor its movements. Typically the vehicle can then be tracked remotely on the internet and the whereabouts of the car can be tracked. This can be very useful in an asset search but is generally only used in specific circumstances. As we always advise, seek legal and other professional advice before you decide to employ such techniques.

8. Other Forensic Technology applications. In the modern technological era, there are many electronic devices that retain useful information. A Forensic computer expert can extract data from a variety of devices. This can include a printer, mobile phone, blackberry, other P.D.A device, desktop or laptop computer and memory sticks. Forensic technology professionals are even able to recover deleted files from these types of devices. The information recovered from these devices may lead to the asset you have been searching for.

9. Credit Card Statements. A review of an individual’s credit card statement can be surprisingly effective at locating assets. Once you have obtained the credit card statement it may show information that can be used to conduct other searches. For example the location of a restaurant can be found by typing in the vendors name into Google. This may indirectly assist you in your asset search.

10. Bank Statements. If you have access to bank statements of the individual or company in question may show large round numbered transfers or other suspicious transactions to other entities or to other countries. This information may directly lead to the assets in question.

As can be seen, there are numerous techniques that a forensic accountant can assist you with in relation to an asset search. The exact techniques will be dependent on the client situation and will depend upon your relationship with the individual or company concerned. Asset searches can have mixed results but in particular circumstances, they are well worth the time and cost that’s incurred. If you are concerned about assets being transferred out of your control then our experts at Rushmore Forensic will be happy to discuss your requirements in a confidential manner. Rushmore Forensic have expertise in divorce, commercial litigation and other forensic accounting engagements. Please contact us to arrange an appointment in our North Sydney or Baulkham Hills offices.

Filed Under: Family law, Investigation Tagged With: , ,

Capital Gains Tax (CGT) and Divorce

28 March 2011 By

CGT and Divorce

Where there is a breakdown in a personal relationship, and the ownership of an asset changes, there is a CGT relief measure that applies.

Q. I am in the process of a divorce settlement. Together with my former spouse we own two investment houses and a business. We have decided to split 50-50, with her taking the investment houses and I keep the business, which she has not being involved in. She is taking the CGT into account for the houses and I’m not sure of the legalities of the CGT for the business and rental houses. All were purchased after 1993.

A. It’s interesting when you do a search on capital gains tax and divorce there is very little listed as being produced by the ATO. One of the few things that the ATO does offer is a list of assets that are CGT exempt. These include:

  • an asset acquired before September 20, 1985
  • cars, motorcycles and similar vehicles
  • compensation received for personal injury
  • disposing of a main residence
  • a collectable – for example antiques or jewellery costing $500 or less
  • a personal use asset acquired for $10,000 or less – for example, items such as boats, furniture, electrical goods and household items used or kept mainly for personal use or enjoyment. Land and buildings are not personal use assets
  • disposing of an asset to which the small business 15-year exemption applies
  • the exchange of shares and units owned in a company or trust that is taken over, if certain conditions are met, and
  • shares in a company or interests in a trust where there has been a demerger and certain conditions have been met.

Although not strictly an exemption, there is capital gains tax relief that applies where the ownership of an asset changes as a result of divorce. The relief is in fact not optional and must be applied where a legally binding agreement has been entered into. This could be an agreement imposed by the family court or one mutually agreed between the parties to the divorce.

Under the rollover relief that must be applied in the case of a divorce agreement there are no capital gains tax implications for the person disposing of an asset. The person who receives the asset as a result of the divorce agreement takes over all of the CGT history related to the asset.

In relation to the divorce settlement with your wife this will mean the rental properties being transferred to her will be regarded as being purchased by her when you purchased them as a couple. There is no capital gains implication for you but she will pay CGT when she sells them if the net sale proceeds exceed the cost paid by you as a couple.

With regard to the business that you will be retaining, there is no capital gain payable by your wife. When the business is sold you may be able to take advantage of the various small business capital gains tax concessions. These include the 15 year asset exemption, the 50 per cent active asset exemption, and the retirement exemption. To be eligible for these concessions you must either have a turnover of less than $2 million or meet the other criteria.

(Source: CGT is as certain as death and taxes, Max Newnham, 28/3/11, SMH Money)

Further Information

If you would like further information about using our forensic accounting services for a divorce, litigation, asset search, or other forensic accounting matter, then please contact us for an obligation free discussion. We provide services to corporations, law firms and individuals in Sydney, Brisbane, Melbourne, Adelaide, Perth and across Australia. Call now on (02) 8019 7262.

 

Filed Under: Family law, Forensic Acccountant Tagged With: , , , ,

Assets in Divorce

13 March 2011 By

If you are in the process of divorce or leading up to divorce it’s important to understand what assets are likely to be included or excluded from the eventual property settlement. Understanding how the process works, planning for a property settlement and engaging an expert valuer/forensic accountant can all have a major impact on your financial position at the conclusion of the divorce proceedings.

For many people their assets will include some or all of the following:

  • The family home.
  • Other investment properties.
  • Household possessions.
  • Vehicles including motor bikes.
  • Boats and jet skis.
  • Investments i.e. shares and managed funds; and
  • Superannuation.

However one common asset that is often forgotten when thought turns to assets in divorce is either your or your ex’s business. Businesses come in many forms and can include small ventures such as online businesses, lawn mowing, milk delivery runs and other activities that are run for commercial gain. If you or your ex-partner is a tradesman, then there is likely to be a business and this will need to be valued as part of the property settlement.

When it comes time for a business valuation expert to value the business, then the financial records that are kept are vital pieces of potential evidence in the divorce proceedings. Many smaller businesses have poor record keeping practices and many jobs may not be formally entered into an accounting system. If you or your former partner runs a business, then it’s important to try and secure as much evidence as possible as to the true trading activity of the business. This can include obtaining copies of diaries, bank statements, MYOB or other accounting files, hard copy versions of invoices and any other documentation which shows the true financial position of the business. The value of a business can have a substantial effect on the assets in divorce, and in many situations it can exceed the value of the other assets combined.

The value of a business in a divorce can have a substantial effect on the final property settlement. The valuations can often be complex and require many subjective matters to be taken into account. An expert valuer and forensic accountant will transform various pieces of evidence (such as diaries and other financial records) into a report which clearly spells out the trading activities of the business, its financial performance and ultimately what the business is worth. The reconstruction of financial records is a core skill to a forensic accountant and together with your legal counsel will play an important role in preparing for the divorce proceedings.

About the Author

Andrew Firth is a forensic accountant based in Sydney. He is an expert valuer and specialises in reconstructing financial records and valuing businesses in litigation. If you have a divorce, commerial dispute or other forensic enquiry, Andrew would be happy to discuss this with you.

Rushmore Forensic have offices in North Sydney and Baulkham Hills. They regularly conduct forensic accounting and valuation work across Australia and internationally.

Filed Under: Expert witness, Family law Tagged With: , , ,