In the decision of Tomaras & Tomaras & Anor and Commissioner of Taxation (2017) FamCAFC 216, the Full Court of the Family Court of Australia answered a stated case as to whether s.90AE of the Family Law Act 1975 (Cth) (the Act) was binding on the Crown in relation to taxation debts.
In property proceedings in the Federal Circuit Court of Australia, the wife sought an order that the respondent husband be substituted for her as the party liable to meet a taxation debt to the Australian Taxation Office.
The trial Judge stated a question for the Full Court:
Does s.90AE(1)-(2) of the Family Law Act 1975 (Cth) grant the court power to make an order in s.79 proceedings substituting one party to a marriage for another in relation to a taxation debt?
Section 90AE of the Act empowers the Court in property proceedings to substitute one party for the other party in relation to a debt owed to a creditor of the marriage.
Matters for consideration before the Full Court were:
- Was the Crown a creditor for the purposes of s.90AE?
- Was the presumption rebutted that statutory provisions expressed in general terms do not bind the Crown?
- Was it the legislative intent that s.90AE(1) should bind the Crown if the presumption was rebutted?
The Commissioner of Taxation submitted that the presumption did not apply to taxation debts but was limited to debts owed to private individuals and commercial enterprises rather than debts owed to the government. As such, s.90AE could not be invoked to substitute one party to a marriage with the other party in respect of a taxation debt. The Commissioner argued that it was not the legislative intent to bind the Crown and that a substitution of one spouse for another in respect of a taxation debt would affect the ability of the substituted party to object, review or appeal the rights associated with the tax debt.
In answering the stated question in the affirmative, the Full Court found that the issue for determination was whether the Crown was intended to be captured by the definition of “creditor” in both s.79 and s.90AE of the Act. The Full Court held that when drafting the section in question, parliament must be taken to have known that the Commissioner of Taxation has always been treated as a creditor for the purposes of s.79 and s.79A and had it intended to exclude the Commissioner as a creditor when expanding the third party powers of the Court, it could have readily done so. It was the view of the Full Court that the failure by parliament to include such provisions was a strong indication that there was legislative intent that the Commissioner be bound by s.90AE.
The Full Court concluded that one spouse could be substituted for another in relation to a taxation debt.
The application of s.90AE in relation to taxation debts arising in property proceedings may have applicability where:
- the quantum of the debt is certain and not likely to be varied or discharged on appeal or challenge to the Commissioner, and
- a mere indemnity may not suffice to protect the client.