Asset Protection Survives a Scare

Australia’s business and professional communities can breathe a massive sigh of relief after the High Court restored confidence in one the fundamentals of asset protection - putting assets in the name of the low-risk spouse.

In the Bosanac Case, the ATO sought to access 50% of a multi million dollar Dalkeith home, held solely in the wife’s name but substantially funded by the husband, to satisfy unpaid tax debts of the husband. Mrs Bosanac resisted, arguing that her husband had no legal or beneficial interest in the property, and so the ATO was barking up the wrong tree.

A single judge of the Federal Court agreed with Mrs Bosanac and sent the ATO packing, but the ATO was undeterred, appealing to the Full Federal Court. That is where the problems started, with the Court delivering a chilling judgement in favour of the ATO.

Thankfully, Mrs Bosanac is made of stern stuff. She sought and was granted leave to appeal to the High Court of Australia, where five of our most senior judges unanimously allowed her appeal. In essence, the decision turned on the “intention of the parties”, a question of fact. The Court accepted that Mr & Mrs Bosanac intended, from the start, that the property would be owned solely by Mrs Bosanac.

The lesson here is that holding assets in the name of a low-risk party remains a simple and powerful asset protection strategy - but it is critical to clearly document the intention of the parties at the time of acquisition. That way, if litigants or creditors come chasing the high-risk spouse or entity, the low-risk party will be in a much stronger position to resist claims on assets held by them. The overall position of the family group will be protected.