NSW gst & tax related issue with ex being a sole trader & unpaid tax & Gst for 4 years

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phillip.oliver

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15 July 2021
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Writing this on behalf of sister,
Husband as been sole trader & has not paid individual tax or gst for four years. She was not part of this sole trader business ,has only become aware of this just after separation approx 80K ++ tax & gst 40K
whilst we can understand that she has had the benefit of the unpaid taxes & generally speaking would be expected to be paying % of unpaid taxes.
Question 1 is it true that whom ever collected the gst is responsible for the payment to the ATO & she will not be .
Question2 How can she best demonstrate to the court she had no idea of what was happening ?? & limit the % she would be burdened with
cheers & thanks
 

Tim W

Lawyer
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28 April 2014
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...whilst we can understand that she has had the benefit of the unpaid taxes...
Whatever that means?
... & generally speaking would be expected to be paying % of unpaid taxes....
Why?

Going only by what you've said here,
missing facts missing, and with any unstated ifs, buts, maybes, unlesses, and exceptions not allowed for,
it's the collector of the GST who is responsible for remitting it to the ATO.
In the case of a sole trader, it's all on that trader personally.
If the spouse is not involved in the business at all, then the spouse does not accrue liability.

That being said, your sister should get herself formal, independent, and case specific, legal and accounting advice.
(which, yes, she/somebody will have to pay for)
 
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phillip.oliver

Active Member
15 July 2021
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Whatever that means?

Why?

Going only by what you've said here,
missing facts missing, and with any unstated ifs, buts, maybes, unlesses, and exceptions not allowed for,
it's the collector of the GST who is responsible for remitting it to the ATO.
In the case of a sole trader, it's all on that trader personally.
If the spouse is not involved in the business at all, then the spouse does not accrue liability.

That being said, your sister should get herself formal, independent, and case specific, legal and accounting advice.
(which, yes, she/somebody will have to pay for)
Thanks Tim
she has appointed a solicitor & the statement he made was "more than likely you will have to bear some of the PAYG tax that has not been paid as you have benefited from the monies he provided " , very early stages of this separation . She has gone into panic mode & would like to find something out about the gst law on paper and try to rid some fear from her, somehow.
cheers
 

Tim W

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Perhaps that solicitor was talking about Asset Pool calculations, rather than tax debt.
 

Atticus

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6 February 2019
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more than likely you will have to bear some of the PAYG tax that has not been paid as you have benefited from the monies he provided "
Her lawyer is referring to a 2019 finding by the high court that that under Section 90AE of the FLA, the family court can transfer a tax debt incurred by one spouse to the other .... GST is really just money collected by a goods or service provider on behalf of the ATO. I can't see why it would be treated differently than a PAYG tax debt in this context, it's still a debt... That said, I'm not sure how "likely" it would be transferred..

All the other aspects contained in the act around property settlements would also come into play including the affect the final order would have on that party, the capacity to pay the debt, if it's just & equitable to do so under all the circumstances etc.

I believe there is precedents where an ex was found to be just negligent or recklessly indifferent to their responsibilities that would make it unjust to transfer the debt.
 
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phillip.oliver

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15 July 2021
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Thank you Atticus.
At this stage they have requested last four years of all bank accounts , the only thought we had was to take to an forensic accountant to see if there are improprieties eg gambling /other. How Much evidence would be required to prove negligent & reckless behaviou,r I guess is the question
 

Tim W

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Perhaps what Atticus is talking about is what the (Family Law) Act calls "property settlement proceedings".
In short and simple - it's the mathematics around the size of the asset pool.
In cases like the one he's talking about, the size of what's called a "negative asset pool", or a "negative property pool".
That is, when the debts are greater than the value of the asset pool.
Certainly this calculation can include the debts owed by a bankrupt party to a marriage.
(For most bankrupts, the priority creditor is usually the ATO anyway...)

First though - don't panic.
She's not always and automatically liable for his personal (or indeed, his business) debts.
The finding to which @Atticus refers is a "can", not a "will" or a "must".
That order is only made where the court is satisfied that it is just and equitable to do so,
and where there is a realistic prospect of the debt (or some relevant share of it) actually being paid.

Look, she already has her own lawyer, and she should take that lawyers advice.
The laymen here will say what they will, but the lawyers here won't second guess
the third hand versions of advice she's already receiving.
That being said, if the lawyer is out of her/his depth, then she is free to go elsewhere.
 
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Atticus

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6 February 2019
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the only thought we had was to take to an forensic accountant to see if there are improprieties eg gambling /other. How Much evidence would be required to prove negligent & reckless behaviou,r I guess is the question
That's a different concept to that of transferring a tax debt under S90AE ..... Finding proof of gambling etc might add weight to an argument of 'wastage', & on that evidence seek an add back or adjustment in her favour in final orders.... A forensic accountant may cost a lot more than any adjustment or add back anyway, that's if they even found any actual evidence of wastage, which requires a lot more evidence than just a regular bet or night at the pokies. They are acceptable & legal activities.

As far as the tax debt goes, it's up to the other side to provide evidence as to why they should not be held 100% accountable... A difficult task if your friend had no involvement in the activity that accrued the debt & no reasonable prospect of having had knowledge of it.
 
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phillip.oliver

Active Member
15 July 2021
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Sister today Has been sent tax benefits A & B for tax year 2019-2020 , good part is that we now now he is getting his tax sorted.
Question would she have to give any % of this to him .

cheers