Court can order transfer of tax debt between spouses: High Court

HHG Legal Group’s Eliza Fitzgerald, Solicitor in Family Law, and Simon Creek, Managing Director and Special Counsel in Family Law, discuss the decision in Tomaras & Ors where the High Court in December decided that a tax debt can be transferred between spouses.  

Simon Creek

The power of the Court to assign a tax debt of one spouse to another pursuant to Part VIIIAA of the Family Law Act 1975 (Cth) (‘FLA’) was recently considered by the High Court in the case of Commissioner of Taxation for the Commonwealth of Australia v Tomaras & Ors [2018] HCA 62.


The husband and wife, the first and second respondents, married in July 1992 and separated in July 2009. During the parties’ marriage, the Commissioner issued several assessments requiring the wife to pay income tax, Medicare levies, penalties and general interest. The wife did not pay the amounts assessed, and did not lodge objections to those assessments. In late 2009, the Commissioner obtained a default judgment against the wife in the amount of $217,669. The wife did not subsequently pay the judgment debt and the Commissioner failed to enforce it.

In November 2013, the husband became bankrupt. One month later, the wife commenced proceedings against the husband in the Federal Circuit Court seeking orders for the alteration of property interests under s 79 of the FLA. She sought, pursuant to s 90AE(1)(b) FLA, that the husband be substituted as the sole debtor to the Commissioner in respect of her taxation liabilities including general interest charged.

In February 2016, the Commissioner was granted leave to intervene in the proceedings.


Pursuant to section 79 of the FLA, the Court has the power to re-distribute matrimonial property between the parties to a marriage. The Court also has the power to bind third parties to the proceedings in particular circumstances. Section 90AE of the FLA provides the Court with the power to make orders directed to a creditor of one party to substitute the other party in relation to a specific debt owed to that creditor, provided that the criteria listed in s 90AE(3) and s 90AE(4) are met.


At the first instance, Purdon-Sully J asked a question of law for the opinion of the Full Court of the Family Court:

Does s 90AE(1)-(2) of the FLA grant the court power to make order 8 of the final orders sought in the amended initiating application of the wife?
Order 8 of the orders sought by the wife stated as follows:

Pursuant to section 90AE(1)(b) of the Family Law Act 1975 (Cth), in respect of the wife’s indebtedness to the Commissioner of Taxation for the Commonwealth of Australia [for] taxation related liabilities in the amount of $256,078.32 as at 9 August 2016 plus General Interest Charge (GIC), the husband be substituted for the wife as the debtor and the husband be solely liable to the Commissioner of Taxation for the said debt.


The Full Court answered in the affirmative,however this was subject to the proviso that s 90AE(1) confers power only to make an order that the Commissioner be directed to substitute the husband for the wife in relation to the debt owed by the wife to the Commissioner.

The Commissioner appealed to the High Court.


The High Court unanimously upheld the decision of the Full Court noting that s 90AE(1) conferred power on the court to make an order that the Commissioner of Taxation be directed to substitute the husband for the wife in relation to the taxation liability.

The High Court further held:

“it [was] otherwise inappropriate to answer the question without it being found, or agreed, that, within the meaning of s 90AE(3), the making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage, and it is not foreseeable at the time that the order is made that to make the order would result in the debt not being paid in full; and without the court being satisfied that, in all the circumstances, it is just and equitable to make the order.”


Eliza Fitzgerald is a Solicitor in Family Law at HHG Legal Group. Connect with Eliza via LinkedIn.


Simon Creek, HHG Legal Group Managing Director and Special Counsel in Family Law, leads the firm’s commitment to client care and quality service. Simon also heads up the Family & De Facto law team as Special Counsel, combining his passion for community and business development with high level legal expertise. Since being admitted to practise in 1998, Simon’s impressive career has been consistently celebrated. In 2017 he was named Western Australia Lawyer of the Year by the Law Society of WA. In the same week HHG received the Attorney General’s Community Service Law Award, largely due to Simon’s creation of HHG Giving Back, the charitable arm of HHG Legal Group.

Simon has also been an Australian Law Award and Australasian Law Award finalist two years in a row, receiving runner-up for the 2015 and 2016 Managing Partner/Director of the Year and Legal Innovator of the Year awards. In 2008, Simon won a 40Under40 Business News Award, in part for his role in growing HHG Legal Group from eight staff members to fifty in four years.  From there, Simon led HHG to either win – or be runner up – for 14 state and national awards including the Rising Stars award in 2010. In 2016 Simon became a Nationally Accredited Mediator, allowing him to extend his services to all levels of alternate dispute resolution. Simon is happy to mediate any type of dispute, with or without the parties having legal representation.

Highly regarded by the legal industry, Simon was elected to The Legal Practice Board of Western Australia in 2011 and re-elected in 2013. He sat on the 2010/11 Council of the Law Society of Western Australia, and is a member of the Law Council of Australia and the Family Law Practitioners Association of WA. He is also a founding member of Collaborative Professionals (WA), a Fellow of the Australian and New Zealand College of Notaries, a past member of the Brief editorial committee of the Law Society of Western Australia, and a Member of the AICD. Simon has been published in numerous professional publications and presented at the Australian Property Institute, Rotary, and Australian Legal practice on family law and financial planning. He is the past Editor of several chapters in Halsbury’s Laws of Australia and regularly presents to accountants, financial planners and private bankers. Simon is also resident legal expert for 98.5fm, Channel 9 and 6PR, weekly appearing on TV and radio to share his treasure-trove of knowledge. Connect with Simon via LinkedIn.

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