Tax Office can access Family Court documents for tax purposes
A recent case in the Family Court set the precedent of allowing the Australian Tax Office (and other bodies) to access family court documents for purposes unrelated to the court proceedings such as tax audits and assessments.
A recent case in the Family Court granted the Commissioner of Taxation access to private court documents filed in Court proceedings between a husband and wife. The Family Court also allowed the Commissioner to use the information contained in the documents for tax purposes.
Mr. and Mrs. Darling (pseudonym name given by the Court) were parties to proceedings in the Family Court. They reached an agreement by consent, and the court proceedings were dismissed - but not before the Taxation Office had begun an audit of the husband’s tax affairs and requested copies of documents the Darlings had filed with the Family Court.
Initially the ATO's request was refused
In the first instance, Judge McMillan held that the Tax Office was under an implied obligation not to use the documents for a purpose not related to the original litigation in the family court. One of the reasons for this obligation, was to “preserve the parties privacy and to encourage full and frank disclosure” both of which are of an important and sensitive nature during family law proceedings.
The court considered, among other things, the judgement of Daniels Corporation, where it was held by the High Court that:
“…statutory provisions are not to be construed as abrogating important common law rights, privileges and immunities in the absence of clear words or a necessary implication to that effect.”
Then the decision was appealed
On appeal of that decision, however, the Full Court of the Family Court agreed that the Commissioner could access documents which the husband and wife had submitted to the Family Court, and further, that the documents could be used for a purpose other than the family court proceedings – in this case, in connection with an audit and assessment of the husband’s tax affairs, under the powers conferred on the Commissioner of Taxation under the taxation legislation.
Included in the many factors the Court considered in exercising their discretion in favour of the Commissioner, was that “the commissioner is performing an important public duty… The public interest is advanced by ensuring all taxpayers pay their fair share of tax.”
The court considered the decision would not result in any greater disincentive to parties to be frank with the Court and make full financial disclosure because there already is a disincentive to litigants to be frank with the Court about tax evasion. The Court noted that it can and does refer such matters to the authorities for investigation.
Accessing the Family Court puts your personal life on Public Record
Parties to proceedings in the Family Court should be aware that their matter, and sensitive information disclosed to the Family Court, will be on the public record and easily accessible by the public.
Additionally, this case now sets the precedent that the Australian Taxation Office and other third parties can, in certain circumstances, access Court documents and use the information contained in those documents for purposes unrelated to the Court proceedings, such as tax audits and assessments.
There is a way you can keep your personal life private when settling property matters.
The Family Law Act, offers an alternative approach for couples to finalise property and related matters, in a way which is legally binding, whilst keeping personal information completely private and out of the public arena.
Binding Financial Agreements are a private agreement which can be used by couples to set out how, in the event of breakdown of their relationship, their assets and/or liabilities are to be dealt with. They are a type of private contract made under the Family Law Act, and do not need to be filed with or approved by the Court or other body in order to be legally binding.
For more information on how you can use a Binding Financial Agreement for your relationship, either before marriage or moving in to a de facto relationship together (pre-nup), during your relationship or after separation or divorce, see here.
By Ian MacLeod