A very important draft taxation ruling issued last week.
Up to now, the ATO has been acknowledging that a payment by a family company to a family member under a Family Court order is tax free.
If the draft ruling becomes final that will no longer be the case. Whether or not there is a Family Court order, payments to family members will be subject to tax.
Transfers of property from family companies are currently subject to tax and will continue to be so in the future.
There is likely to be a carve out in relation to Family Court orders before the date of the final ruling (sometime in the future) in relation to payments but not property transfers.
Great care will need to be taken in respect of any pending Family Law matters involving family companies.
For more information please contact Jim Main.