Purchasing the family home is one of the most significant investments most couples will make. When it comes to deciding whose name will be on title, asset protection is a major consideration. A couple will want to protect the property in the event that one of them falls into financial difficulty. If for example the property is in your name (even if jointly owned with your spouse or partner) and a claim is made against you, then the property may need to be sold to pay your creditors.
The question then becomes who is the person less likely to be the subject of a claim and therefore the best person to own the property? Even if you decide whose name will be on title, this tactic is not always foolproof.
In the recent High Court case of Bosonac,[1] the Commissioner of Taxation argued even when one spouse doesn’t own a property, the Commissioner may claim an interest in that property where the spouse has paid monies towards the home (i.e. paying the deposit or mortgage repayments). It is important to understand how this may arise and what steps you can take to protect the family home.
Presumption of resulting trust
At law, if both spouses or partners have financially contributed to the property (such as by servicing a loan to pay the deposit or making mortgage repayments), then there may be a presumption that both have an interest in the property, even if the property is in the name of person least likely to be sued.[2] This is known as the ‘presumption of resulting trust’.
However, the presumption of resulting trust will not arise in cases where:
- it was never intended that the parties would both have an interest in the property; or
- the financial contribution by the husband was an ‘advancement’ to assist his wife to purchase the property.
Exception of advancement
Although technically called a ‘presumption of advancement’, this exception acts as a rebuttal to the presumption of resulting trust in certain relationships.[3] If the husband (who isn’t on title) makes contributions by way of a gift to advance his wife in purchasing the property, it can be considered an exception to the presumption of resulting trust. In this instance, the beneficial and legal interest in the property remains with the wife whose name is on title. Whether such an exception arises is a question of intention arising entirely from the facts and, sadly, the exception has not kept up with the times and only has very limited application since it only applies to a contribution made by a husband to a wife or a parent to a child.
The Bosonac case
In Bosonac, a husband and wife had purchased a property using funds from a joint loan account to pay the deposit and taken out a mortgage in both of their names to pay the purchase price. The joint loan account and mortgage were secured against properties they each owned separately. The property was purchased in the name of the wife, not the husband.
The question was, did the husband have an equitable interest in the property by virtue of financially contributing to the deposit and purchase?
The High Court had to consider whether the exceptions to the presumption of resulting trust existed, and if they did, the husband had no interest in the property. The applicant (in this case, the ATO, who was owed large amounts of money in taxes) argued that the exception of ‘advancement’ no longer applied to matrimonial homes and that the husband had a 50% beneficial interest in the property.
In dismissing the ATO’s argument, the High Court confirmed that although the exception will apply to matrimonial homes, the proper approach is to determine whether it was intended that the husband would have an interest in the property. The High Court determined on the evidence that the husband never intended to hold an interest in the property and that he was doing no more than facilitating his wife to purchase the property for herself.[4]
This case highlights the importance of properly recording the reason for providing financial assistance to a spouse or partner who intends to purchase a property. If the intention can be clearly deduced from the evidence, a court will be less likely to rule that the spouse or partner in financial difficulty has an interest in the property.
Take the right steps to protect the family home
As highlighted by the recent case, couples need to do more than just own the property in one person’s name to protect it.
If you would like advice on what practical steps you can take to protect your family home, please contact Antony Harrison (aharrison@mahoneys.com.au) or Sabrina Austin (saustin@mahoneys.com.au).
Written by Antony Harrison & Sabrina Austin
[1] Bosanac v Federal Commissioner of Taxation [2022] HCA 34.
[2] Calverley v Green (1984) 155 CLR 242 at 246.
[3] Pettitt v Pettitt [1970] AC 777 at 814; Wirth v Wirth (1956) 98 CLR 228; Calverley v Green (1984) 155 CLR 242 at 251; note, the presumption of advancement applies between a husband to a wife, child or someone who the person stands in place of a parent (such as a legal guardian), or between a mother and child. It does not arise where a wife gifts money to her husband.
[4] Bosanac v Federal Commissioner of Taxation [2022] HCA 34 at [121]-[126].
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