Divorce – What it means to you & your Business
Breaking up is hard to do. Beyond the emotional and financial turmoil divorce creates, there are a number of issues that need to be resolved.
What happens when there is a family company?
A recent ruling from the Australian Taxation Office (ATO) will create a tax burden for many divorcing couples that have assets tied up in a company. Previously, when a company transferred assets or cash to one of the former spouses under a Family Court order, many people took the view that the transfer was not treated as a dividend and did not trigger tax. However, in a ruling released on 30 July this year, the ATO confirms that any settlements paid out by a corporate entity are treated as income and taxed at the relevant spouse’s marginal tax rate.
If you are receiving assets from a corporate entity as part of a property settlement, it’s essential that you understand the tax implications prior to settlement or a sizeable chunk of the settlement could go to the ATO.
For business owners, outside of the tax and financial issues, it’s important to not lose focus on what’s important to keep the business running efficiently.