The Family Court has given a timely reminder of its duty to protect tax revenue

The Family Court has given a timely reminder of its duty to protect tax revenue, in the recent decision of Kruger & Zaio [2009] FamCA 1218. Justice Mushin adjourned the property trial out of concern that the litigant husband and wife had failed to file tax returns for a number of years, and discrepancies between the information declared in the tax returns which had been lodged and the sworn evidence in the proceedings.

The Court referred the matter to the commissioner of taxation and ordered that court documentation and 'any other document' requested by the Commissioner, be delivered to the ATO, to enable action to be taken for non-compliance.


Reasons for judgement

1. At the request of counsel, and with the agreement of their clients, I met with counsel in chambers. This is clearly not a case which can be contained within two or three days, as was quoted in the original mentions of these matters.

2. While in chambers with counsel I raised a problem which I see as being fundamentally important. Upon reading the relevant documents in this matter yesterday, it occurred to me that I was going to have difficulty in doing justice and equity to the parties in accordance with the requirement of the statute because it seemed to me that the tax records of the parties were less than complete.

3. At the beginning of the sitting today, when the case was called on, I asked counsel to provide me with copies of the relevant tax records and I was assured by counsel that that with which I have been provided is all that they have. The documents themselves appear to me to be quite inadequate.

There are no tax returns in respect of several of the relevant tax years and on a first inspection, it would appear that there may be a lack of correlation between the documents which I have been given and the parties’ sworn financial statements in these proceedings.

4. In those circumstances in the event that there is a significant disparity in the tax situation, it may well be that the asset position, as represented by the parties, is not accurate and that there may be a significant tax liability which at this stage is unstated. In those circumstances, I take in to account the judgment of Lindenmeyer J in P & P (Tax Evasion) (1985) FLC 91-605 and which states the duty and responsibility of the court to protect the revenue. In my view, the situation with the parties’ disclosure is far from satisfactory and I, therefore, feel unable to go on with these proceedings.

5. In those circumstances, I have decided that the proceedings will be adjourned and I will require the parties to ensure that they file all relevant tax returns. I will cause a copy of these reasons, together with a copy of the order which I will make and the parties’ affidavits of evidence-in-chief and Financial Statements, to be forwarded to the Commissioner of Taxation of the Commonwealth of Australia and invite him to take whatever steps he sees as being fit.

6. Upon completion of that process, the proceedings will resume before me. To that end, I will require a mention to be made of the proceedings after Easter 2010. In those circumstances, the proceedings will be adjourned.

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