By Peter Nevile
Risk Management/Asset Protection
Holding your principal place of residence in your spouse’s name.
As part of risk management strategy, we often advise our clients to ensure that they separate their assets from their risk, generally known as quarantining. Where one party is the principal breadwinner and, particularly if they are a director of a company or run a business, there is always risk. It is therefore important to safeguard the family assets. Accordingly, we suggest they quarantine the principal place of residence in the spouse’s name. While this is best done on the initial purchase, a transfer from joint names to their spouse’s name can be done with a stamp duty exemption.
Often the property has been purchased with joint assets and the party exposed to risk may have made significant contributions to the deposit and the mortgage or other costs relating to the property over the years. In 2002 there was a case of Bosanac v Commissioner of Taxation. This is a pivotal case in Australian equity and trust law. It concerns the presumption of resulting trusts and the presumption of advancement. In this case the married couple purchased a property, paid the deposit from their joint account and financed the balance through two joint loans. However, the property was registered solely in Ms Bosanac’s name. Mr Bosanac had significant tax debts, and the commissioner of taxation sought to establish that Ms Bosanac held 50% of the property on trust for her husband so the ATO could satisfy the tax liability.
The High Court decided that she did not hold any part of the property on trust for her husband, the reasons were as follow:
- The presumption of resulting trust implies that a person who contributes to the purchase price of a property but is not on title, retains a beneficial interest was not applicable. The evidence didn’t support any intention for Mr Bosanac to have a beneficial interest.
- The presumption of advancement implies that in the case of a married couple, where one spouse contributes to the purchase of a property registered in the name of the other, there’s a presumption of advancement — i.e., that the contribution was a gift, not a trust.
- The court noted that the property’s title was solely in Ms Bosanac name and there was no indication that the parties intended for Mr Bosanac to have a beneficial interest.
It is important in such circumstances to have extremely clear documentation and an understanding of property ownership arrangements between the spouses.
If you are considering quarantining that is separating your assets from your risk, then please do not hesitate to contact us to discuss this matter further. Please also note that in this case the property was purchased in the wife’s name at the outset not from a later transfer.
Peter Nevile.
Disclaimer: This publication contains comments of a general and introductory nature only and is provided as an information service. It is not intended to be relied upon as, nor is it a substitute for specific professional legal advice. You should always speak to us and obtain legal advice before taking any action relating to matters raised in this publication.
