Disclosure in Family Law – How can Accountants assist and what are the limits of disclosure?
As lawyers, at some point in time we have all been subject to the sharp tactics of American courtroom drama, where the opposing lawyer tenders undisclosed information last minute in an attempt to throw the other party off their game. As enticing as this strategy is, such antics are unacceptable in Australian Family Law.
Under the Family Law Rules each party has a duty for full and frank disclosure of their direct and indirect financial circumstances. Generally speaking, such disclosure includes all assets, liabilities and financial resources.
This duty of disclosure, which is ongoing, also extends to companies and trusts. Whilst you may not be a beneficiary of a trust, the Court can exercise their discretion to include the trust as a financial resource to the matrimonial pool. You can find out more about Discretionary Trusts and the Family Law here.
So what do I disclose?
Generally speaking your solicitor will often ask you to disclose the following:
- Your Individual Tax Returns and Notice of Assessments for the past three financial years;
- Three most recent payslips;
- All bank account statements, credit card statements and loan accounts for the last 12 months held in your sole name or jointly with another person;
- Details of any properties held in your sole name or jointly with another person, including a market appraisal or valuation of the properties;
- Your most recent superannuation statement;
- Details of any shareholdings;
- Details of any entities that you are a Director or Shareholder of;
- Details of any trusts of which you are the appointor, trustee, controller or beneficiary of; and,
- Details of any disposal of property made in the last 12-months prior to separation.
How can my Accountant help with my disclosure?
Accountants have obligations to their clients. They use their expertise and knowledge of tax law to position their clients in the most effective tax position within the existing law. Accountants and lawyers can work constructively together to determine the true value of the matrimonial pool.
There are numerous items that your Accountant can provide to us directly to help with your duty of full and frank disclosure, including:
- Detailed explanations of the structure and purpose of entities that you own and trusts that you are a beneficiary, trustee, controller or appointor of;
- Financial Reports;
- Profit & loss statements;
- Asset & liability Statements;
- Business Activity Statements;
- Balance Sheets;
- Depreciation Schedules;
- Income Tax Returns;
- Details of any Capital Gains Tax that would be payable should you wish to sell any shareholdings or properties;
- Constitutions, Trust Deeds, Shareholder or Partnership Agreements; and,
- An approximate value placed on the entity or trust.
The above is only a short list of documents we require in the first instance. It’s common for parties to disagree on the value of entities and trusts. When this happens, parties then have the option to appoint a single forensic expert to determine the true value of the entity, trust and a party’s interest in them. Failing agreement between the parties to appoint a single expert, the Court will make an order that one is to be appointed.
Is there a limit on what I need to disclose?
Of course, you’re not obliged to provide everything. Your duty of disclosure doesn’t mean your former spouse or de facto are free to go on a fishing expedition. You’re limited to disclosing documents that will directly affect the case or the value of the matrimonial pool. A party under Rule 13.26 of the Family Law Rules and Rule 14.01 of the Federal Circuit Court Rules, subject to some qualifications, may serve specific questions on another party. You can raise objections to answering such questions if you have a reasonable explanation for doing so, for example, where the questions are vexatious or oppressive. Further, you’re only required to disclose documents that are in your possession or control (this extends to your right to the documents, even if you don’t physically possess them).
What if I don’t disclose?
If you fail to comply with your duty of disclosure, the Court may use discretion to impose penalties such as fines or punishment for a finding of contempt of Court. Also, the Court could question your conduct and credibility, and make strict orders that you provide the requested documents. The Court has other sanctions available to it if you further refuse or fail to provide disclosure. The party seeking the documents is also at liberty to serve subpoenas to any third party within the jurisdiction holding the information or records. If a matter is settled and a party becomes aware that you haven’t disclosed your true financial position, they can commence new proceedings to set aside the agreement or orders. The Court may also make an order for costs against you.
If you are ever unsure on your duty of disclosure, it is important to seek legal advice. If you have any questions concerning disclosure, please make sure you contact Coleman Greig’s Family Law team on 02 9895 9257 or firstname.lastname@example.org
About the author: Danielle Micallef is a family law legal clerk with Coleman Greig Norwest office.