Can you own property without meaning to?

You are currently viewing Can you own property without meaning to?

And can an asset protection strategy fail even when you think your property has been carefully insulated from risk?

These questions can be straightforward, although the ATO made a complete hash of it in recent litigation.

Bosanac v Commissioner of Taxation

Mr and Mrs Bosanac purchased their marital home in 2006 for $4.5m. The property was held in Mrs Bosanac’s name, with the purchase price paid via loan accounts in the husband and wife’s joint names. There was no evidence that the property was held by Mrs Bosanac for the purpose of defeating her husband’s creditors.

Eventually, the couple separated. Unfortunately, Mr Bosanac had an ATO debt of $9.3m for unpaid taxes. The ATO pursued Mr Bosanac for this amount and sought declaratory relief that he held a 50% equitable interest in the home via a resulting trust.

Is it yours or is it mine?

At first instance and on appeal, the matter became bogged down on two legal principles – the presumptions of advancement and resulting trust.

The presumption of advancement assumes that in certain relationships (including from husband to wife), parties intend a transfer of property to be a gift. At first instance, the Federal Court held that Mr Bosanac’s contribution to the purchase price (via the loan accounts) was a gift and that Mrs Bosanac held 100% of the equitable interest in the property.

The presumption of resulting trust assumes that a party that makes a financial contribution to a property purchase intends to retain that contribution, which is then held on trust for them by the registered owner of the property.

On appeal, the Full Federal Court held that Mr Bosanac retained a 50% interest in the property held on resulting trust.

Look at the evidence

The High Court pushed aside these technicalities in its analysis (and it’s here that the lesson lies). Both presumptions can be rebutted by looking at the evidence of the parties’ actual intentions.

In this case, the High Court was able to infer from the available evidence that it was both parties’ intent that the matrimonial home was to be held solely by the wife. The Court made this conclusion from the parties’ conduct in previous property dealings, although it was only an inference as there was no express or conclusive documentary evidence.

Get it in writing

Where couples intend property to be held by a single person (even though both parties may have contributed to the purchase price), consideration should be given to whether that intention should be included in express correspondence at the time of purchase. Clear evidence showing the parties’ intention may be useful in matters concerning not just creditors, but also family law and other disputes (of course, it should always be noted that transfers of property made to defeat creditors are voidable by a trustee in bankruptcy).

For legal advice on this or any other matter, contact Aintree Group Legal today.