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In ever increasing numbers, property settlements between parties to a relationship breakdown will incorporate issues involving corporate and trust entities, which may have been established for any number of reasons, including for taxation purposes, asset protection or estate planning purposes. In this context, it is essential that practitioners be alive to and take into account the possible revenue consequences of any orders for property settlement proposed, whether by agreement between the parties or as a result of litigation before the Courts.
Without doing so, the grave risk for both practitioners and their clients is that unintended consequences will result from the parties’ property settlement, maintenance arrangements or other dealings, beyond those considered by the parties or the Court in determining the appropriate orders to be agreed or made (as the case may be) and substantially altering the overall property settlement intended.
While it is beyond the scope of this paper and our presentation to cover in detail all of the potential issues that may arise in any given case, we will examine a number of main issues that commonly arise in property settlement matters including the following:
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The relevance of tax in ascertaining the pool of property for the purposes of a property settlement; and,
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Avoiding unintended consequences of transactions to give effect to property settlement orders.
Further, the fact that in addition to property settlement proceedings potentially raising future tax implications for the parties, it is commonly the case that the proceedings will expose the parties’ previous taxation history; including any tax irregularities, deliberate or accidental. Accordingly, this may be a further issue to be considered in the circumstances of particular cases.
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