Change in taxation of benefits a spouse receives from a company in a Property Settlement

The long awaited change to the way the Australian Taxation Office (ATO) will tax every kind of benefit (an asset of any kind or money) a spouse might receive from a company as part of a property settlement, is here at last.

As of 30 July, 2014, the ATO has issued a public ruling on how it will tax a spouse (or defacto spouse) on any property, asset or payment received from a private company as a result of a property settlement family court order. The bad news is that it means now having to pay tax on the value of what is received (defined as receipt of a dividend for this purpose). The good news is that this `dividend’ is capable of being franked. This means that where the company is able to do so, a franking credit applies to the `dividend’ received by the spouse. For the spouse this means that the company will pay up to 30% tax on the dividend and the spouse can claim this as an offset to the tax that will be payable on the `dividend’.

The above is a very simplified interpretation of the ruling and if you are intending to receive an asset or a payment from a private company then you should seek advice from a specialist family lawyer regarding your particular circumstances.

This ruling is but the latest example of the growing complexity of family law that demands a high level of expertise such as we are able to offer to clients.