Transfer of asset ownership between spouses

By Sally Storey, Partner

1 August 2022

As part of every business owner’s risk management plan, they should obtain advice about protecting their assets from creditors.

Some company directors, for example, transfer their interest in the family home to their spouse to protect the property against the risk of business insolvency. The harsh reality is that the director may mistakenly consider the family home in the spouse’s name safe in this situation.

The Bosanac scenario

Last August, the Full Court of the Federal Court of Australia in Commissioner of Taxation v Bosanac [2021] FCAFC 158 underlined the central message that company directors must be prudent before making assumptions that personal assets are safe from creditors. 

The issue in the Bosanac matter was whether the bankrupt had an interest in the family home valued at $4.5 million1 registered solely in his wife’s name. The matter revolved around Mr & Ms Bosanac, who purchased a home in 2006. According to a media report, the couple paid a $250,000 deposit with funds from a pre-existing joint loan account in their joint names. The Bosanacs borrowed the remainder to acquire the property in Dalkeith, Western Australia. The property was subsequently used as collateral to acquire other investment assets.

The central issue in the Bosanac matter was the “presumption of advancement”. The presumption of advancement is a starting point for assessing whether spouses have an interest in property regardless of whether they are on the title.

What the full court considered

In the Bosanac matter, the Court accepted that advancement was the starting point but found that the presumption was rebutted by evidence that: 

• The property was intended to be the family home and used jointly to benefit both the husband and wife.
• The husband and wife contributed half of the purchase price by taking out joint loans secured over the property.
• It was unlikely that the husband would have taken on substantial borrowing liability without acquiring a beneficial interest in the property.
• It was unlikely that the husband would have taken on a considerable loan liability to gift the property to his wife in all the circumstances.
• The husband later took out a significant investment loan secured by a mortgage over the property, suggesting that he had an interest in the property that allowed him to do so.

After consideration, the Court found that Mr Bosanac owned a 50% stake in the property, despite the asset being held exclusively in the wife’s name. 

The case demonstrates that proper legal advice is critical before putting a family home at risk in bankruptcy. If you’re a company director and wish to understand ways to protect your personal assets, contact us. 

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1. https://www.accountantsdaily.com.au/tax-compliance/16359-a-shock-to-the-system-federal-court-spousal-asset-ruling-to-impact-accountants
   

Disclaimer

The information provided in this article does not constitute advice. The information is of a general nature only and does not take into account your individual financial situation. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances.