The case concerned the jurisdiction of the Family Court to transfer Commonwealth tax liabilities between parties in a marriage.
Mr and Mrs Tomaras were married from 1992 to 2009. During their marriage the ATO issued an assessment against Mrs Tomaras. In November 2014 Mr Tomaras became bankrupt. Soon after, in December 2014, Mrs Tomaras initiated proceedings in the Federal Circuit Court seeking alteration of property interests under family law. The commissioner was given leave to intervene in the proceedings as Mrs Tomaras had failed to pay the amounts owed after the assessment, without having lodged any objection. Mrs Tomaras sought an order to substitute Mr Tomaras for herself as the debtor.
The High Court found in its groundbreaking judgment that a court has jurisdiction over debts owed to the Commonwealth and has power, under s90AE, to order the commissioner to substitute the husband for the wife in relation to a debt owed to the Commonwealth arising under a taxation law.
Whilst being a landmark case, the ATO notes on its website that the “High Court also observed there will seldom, if ever, be occasion to exercise that power and adversely affect the commissioner or other creditors”. The court stated that a substitution order should only be made where it is “just and equitable to do so” and not if it is foreseeable that the order would result in the debt not being paid in full.
Mark Robertson QC (with S J Carius) appeared for the first respondent, instructed by Hartnett Lawyers.
The judgment is available here.
The statement issued by the High Court of Australia can be viewed here.
Legal commentary on the case and its possible implications can be read here.