Including amicable and litigious property and children’s matters

What is Equal Shared Parental Responsibility?

Equal Shared Parental Responsibility vs Equal Time

The term “equal shared parental responsibility” is often used in family law matters involving children. It is often confused with the term “equal time”.

Equal shared parental responsibility is not the same as equal time

There is a presumption in the Family Law Act 1975 (Cth) (the Act) (subject to some exceptions) that it is in a child’s best interests for their parents to have equal shared parental responsibility. Parental responsibility is defined as all of the duties, powers, responsibilities and authority which parents legally have in relation to their children. Significantly, this presumption relates solely to how parents make decisions for their children: it does not mean there is a presumption that children spend equal time with their parents.

What does equal shared parental responsibility mean in practice? Parents who share parental responsibility equally must make a genuine effort to consult each other about decisions involving long-term issues concerning a child’s care, welfare and development. This includes decisions relating to a child’s health, education, cultural upbringing and living arrangements, particularly when a change to those arrangements would make it more difficult for a child to spend time with a parent.

The presumption of equal shared parental responsibility can be rebutted (meaning there are circumstances where it does not apply). For example, if:-

  • there are reasonable grounds to believe that a parent (or a person living with a parent) has perpetrated child abuse or family violence, or
  • it would otherwise not be in the child’s best interests

then the court will not apply the presumption of equal shared parental responsibility and will allocate parental responsibility between parents as it deems appropriate.

There is no presumption that children must spend equal time with each parent

The Act does not provide that a child must spend equal time with each parent after their parents separate.

Even where parents have equal shared parental responsibility, an order will only be made for equal time if the court finds that it is in the child’s best interests and reasonably practicable. If the court finds that equal time is not appropriate or practicable, it must instead consider making an order that the child spend “substantial or significant time” with both parents.

In considering how much time a child should spend with each parent, the child’s best interests are the court’s paramount consideration. When determining what arrangements are in the child’s best interest, the court will take into consideration several factors including the following:

  • The benefit to the child of having a meaningful relationship with both parents;
  • The need to protect the child from physical and psychological harm resulting from being subject to or exposed to abuse, neglect or family violence;
  • Any views expressed by the child;
  • The nature of the relationship of the child with each of the parents and their respective families; and
  • The practical difficulty and expense of a child spending time with and communicating with a parent.

Conclusion

After separation, when emotions are heightened, confusing the presumption of equal shared parental responsibility with a presumption of equal time is understandable. However, the two concepts are not the same and have different legal meanings. Contact us if you are considering separating or have separated and have questions about parenting arrangements.

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Parents lending to their children

Parents making loans to children

To protect your loan to your children do a legally prepared loan agreement.

A Loan to my child seems harsh

There is nothing wrong with helping your children financially. It is becoming increasingly popular to help out children with a home deposit, but giving away the money has real risks. With loans to children, don’t rely on a verbal agreement. A loan agreement protects the money in case for example:

1. a child divorces;

2. a child goes bankrupt;

3. a child develops a drug dependency or a mental illness; or

5. you run out of savings to pay for assistance required in your old age

Documenting loans to children

Rather than giving your children money, why not lend them money ‘payable on demand’? Treat yourself as if you are a bank, and your children are borrowers. You can then call in the loan if something goes wrong.

A loan agreement protects your interests by putting rules about the loan in writing. In future you can forgive the loan, either during your lifetime or in your Will.

Any tax issues?

There are none if the interest rate for the loan is ‘as advised by the Lender’.  Whilst the interest rate is zero there are no income tax issues.

What is the status of a loan agreement vis-a-vie a mortgage?

If you lend your child money and a bank is also providing them with a loan, the bank lodges a mortgage over the property.

Making a Loan Agreement payable “on demand” does not change the precedence of a mortgage over the property over your rights to repayment. However, repayable ‘on demand’ rather than specifying circumstances for repayment (e.g. house sale, separation, divorce) protects you as it extends the circumstances in which the loan is repayable.

Your loan agreement should give you a right to lodge a caveat over any real estate your child owns in Australia. If there is an existing mortgagee it will be difficult to lodge a second mortgage over the property.

Does the bank (with a mortgage over the home) need to be consulted about a Loan Agreement?

Second mortgages are complex, expensive and rare. An alternative is to lodge a caveat over the property with the loan agreement attached after the settlement.

If your child separates, a professionally prepared loan agreement should ensure that the loan is paid out prior to any payout to their ex-partner.

How to lodge a caveat or mortgage in NSW using a loan agreement

  1. All parties sign the Loan Agreement.
  2. Engage a subscriber to PEXA (such as a lawyer) to electronically register a caveat or mortgage against the title of the property with NSW Land Registry Services.
Conclusion

When making loans to children:

1. talk with all your children about the proposed loan;

2. to protect you and your children – lend (not gift) them money

3. don’t rely on verbal agreements –engage a solicitor to draft a loan agreement

Child Loan Agreement on back of an envelope?

Recording a ‘minute’ or IOU on a piece of paper is not sufficient evidence of the existence of a loan. Only a legally prepared loan agreement satisfies the ATO, Bankruptcy Courts and Federal Circuit and Family Court as to the existence of a loan.

Son refuses to repay father

In Berghan v Berghan [2017] QCA 236 a son refused to pay back money he borrowed from his aged father.

The son’s company suffered financial stress. The father lent his son money. The son then spent more using his father’s credit card.

The District Court held that there was no written loan agreement, the father failed to prove a legal binding agreement, and that the monies were a gift.

The Judge determined that:

  • The son’s promise to look after his father in old age was just a moral obligation.
  • In making the payments to the son, for the benefit of the company, the father was simply discharging his parental obligations. This is because the son’s daughter was an employee at the son’s company. The money was therefore of a charitable nature. The father was protecting the son’s company so his daughter would keep her job.
  • The father allowed the son to use the credit card when the son was injured and impecunious. These circumstances are charitable.

The Court of Appeal overturned the District Court decision, holding that the amounts were loans and that a child loan agreement was inferred.

In setting aside the decision, the Court determined that:

  • The lengthy period it took the father to demand the money did not count against his assertion that a breach of contract existed. Post-contractual conduct is not taken into account when interpreting the terms of a contract.
  • The father’s motivein transferring the money to the son was not relevant.

The Court said that it was an “inescapable conclusion” that the monies were paid with an understanding that they would be repaid. The transactions amounted to a loan contract.

This decision illustrates the perils of not signing a loan agreement.

Additional money to help child buy first home

If you want to help your child with the deposit on their home or they need more equity, you can do a loan agreement and lodge a caveat over the property after the mortgagee has registered the mortgage.

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Capital Gains Tax Rollover Relief

Capital Gains Tax

Capital Gains Tax (“CGT”) is payable pursuant to the Income Tax Assessment Act 1997 (“ITAA”) on the disposal of assets purchased after 20 September 1985. CGT is payable on and is applied to the profit made from the sale, transfer or disposal of an asset to another person or entity. It applies to all assets but there are exceptions including:

  • the parties’ main residence (i.e. the former matrimonial home);
  • cars and motorcycles;
  • personal assets (such as a boat or household furnishings) purchased for under $10,000.00; and
  • collectables (such as artwork, jewellery, antiques or a wine collection) valued at less than $500.00.

An adjustment of property between parties to a marriage or a de facto relationship involving the sale, transfer or disposal of an asset may give rise to a CGT event.

The former Matrimonial Home

If the former matrimonial home has been the parties’ main residence, it is one of the exceptions under the ITAA and selling, transferring or disposing of it will not attract CGT. If however the property was not the main residence of the parties for a period, the situation may be different. If, for example, the property is rented out as an investment property before the parties live in it as their main residence. In such a situation, a sale, transfer or disposal may attract CGT but the assessment will be restricted to the period during which the property was rented out.

Investment Property

CGT will be assessable on the profit from the sale of an investment property or another non-exempt asset as part of a family law property settlement. It is important that a property settlement considers the payment of CGT on the sale of an asset. If the property is in the parties’ joint names (or an entity controlled by both parties), then both parties will be assessed to pay CGT on their share of the profit. If the property is in the name of only one party (or an entity controlled by one party), then that party will be assessed to pay the CGT. Discounts may apply to reduce the ‘profit’ on which the CGT is assessed.

CGT rollover relief

Where a CGT-liable asset is transferred between the parties (rather than sold) then normally CGT would apply to the transfer. If, however, the transfer of the asset is a consequence of the breakdown of a relationship, then sec 126 of the ITAA allows for “rollover relief” on the transfer. CGT can be disregarded until the party receiving the asset sells, transfers or otherwise disposes of it.

For example, CGT is not payable at the time when an investment property is transferred to a party following the breakdown of a relationship. The party receiving it will be liable to pay the tax on any gain made on a subsequent sale or transfer of the asset.  The CGT is calculated as though that party had owned it since their former partner acquired it, including using their former partner’s cost base for the asset.

Rollover relief only applies if:

  • If the asset is transferred between parties to a marriage or a de facto relationship or from a company or a trust to one of the parties; and
  • The transfer is made in accordance with a court order, an arbitration award, or a financial agreement under the Family Law Act.

Will CGT be included in the property pool?

The leading authority on CGT is the case of Rosati and Rosati, where the Full Court of the Family Court outlined the following principles:

  1. Whether the incidence of CGT should be taken into account in valuing a particular asset varies according to the circumstances of the case, including the method of valuation applied to the particular asset, the likelihood or otherwise of that asset being realised in the foreseeable future, the circumstances of its acquisition and the evidence of the parties as to their intentions in relation to that asset.
  2. If the Court orders the sale of an asset, or is satisfied that a sale of it is inevitable, or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then, generally, allowance should be made for any capital gains tax payable upon such a sale in determining the value of that asset for the purpose of the proceedings.
  3. If none of the circumstances referred to in (2) applies to a particular asset, but the Court is satisfied that there is a significant risk that the asset will have to be sold in the short to midterm, then the Court, whilst not making allowance for the capital gains tax payable on such a sale in determining the value of the asset, may take that risk into account as a relevant s 75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.
  4. There may be special circumstances in a particular case which, despite the absence of any certainty or even likelihood of a sale of an asset in the foreseeable future, make it appropriate to take the incidence of capital gains tax into account in valuing that asset. In such a case, it may be appropriate to take the capital gains tax into account at its full rate, or at some discounted rate, having regard to the degree of risk of a sale occurring and/or the length of time which is likely to elapse before that occurs.”

Whether CGT will be taken into account in calculating the net asset pool will depend upon the circumstances of that individual case.

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Relocation with children after separation

This article addresses the question of when — if ever — it is appropriate to move to a new city, a new state, or even overseas with your children.

For simplicity, in this article it is assumed that the children of a relationship spend time with the father and live with the mother who wishes to move. The same principles apply to all scenarios where two or more people with parental responsibility have a parenting arrangement for one or more children. References to a court in this article include the Federal Circuit Court and the Family Court.

What is relocation?

In Family Law, relocation refers to you moving with the children to another town, state or country.

If moving is going to limit the time the children spend with the father, the court may make Orders stopping you from moving.

The complexities of relocation and travel for children after separation

When you separate, whilst sharing parenting responsibilities, you also need to be able to earn a living and to pursue meaningful opportunities for yourself.

Your opportunities may be limited in your current location, or you may wish to move interstate or to a new city to be closer to support networks or better job options. Whatever your motivation for seeking to relocate, there are factors to consider around the impact that moving can have on your children.

Significant psychological factors to consider about relocation after divorce and separation include the potential for the development of mental health problems and complex developmental issues. After separation it is critical to establish a routine and continued and ongoing support and care from both parents.

Reaching agreement

If you are the children’s primary carer and you are looking to move, the first (and best) thing you should to is talk to the father to try to agree to change the time the children spend with him. While he may be completely opposed to the idea at first, you may find that over time you can reach a compromise. For example, the children could live with him for longer periods during school holidays. He may even be open to moving to where you are looking to relocate.

If you cannot reach agreement the next step should be to seek legal advice and attend family dispute resolution. If you reach agreement here, you should formalise it by making a parenting plan, or by applying to the family court for a consent order.

The court can intervene and make a relocation order

If you are looking to move, and you have made this decision considering what is in the best interests of your children — but the father is still refusing to agree — then the court may intervene.

A relocation order sets out conditions of relocation, including when and where a parent can move and how often the other parent can visit.

Best interests of the child

In relocation matters, the guiding principle is the “best interests of the child”. The relocating parent need not present a compelling case but instead must show how it would be in the best interests of the child along with plans as to how the non-relocating parent might still have a relationship with the child.

The Court will consider the existing relationship of the child with the non-relocating parent. This could include circumstances such as family violence that could make for an unsafe situation for the child and parent.

Views of the child

The views of the child will be considered depending on their age and maturity, but the Court will not necessarily endorse these preferences. 

All options should be explored, including both parents relocating, to maintain a relationship with the child.

Each case is different, and a determination will be based on the specific facts and circumstances of the case. In reaching a decision, the Court must balance the child’s interest with those of both parents in a way that promotes the welfare of the child while recognising the interests of the parents.

A new job in a new town may not be considered a suitable move, especially if it:

  • Causes the children significant upheaval;
  • Contributes to the loss of their support networks; or
  • adversely impacts a child’s relationship with the father.

If you move without a court order or without the father’s consent, the court may require you to return with them until final orders are made. If you break a current court order that you not move, the father can ask the court to order that the children be located and recovered to his care.

Can the children travel overseas?

If you are planning an overseas holiday with the children, you should advise the father of your intention as soon as possible. You should provide details of where you will go, a full itinerary and contact numbers for your accommodation.

How do I apply for a passport for my child?

Applications where both parents give written consent can be lodged at an authorised Australia Post office or an Australian Passport Office.

If the other parent will not give written consent, a written request can be made to the Approved Senior Officer of the Department of Foreign Affairs and Trade to consider issuing the passport due to ‘special circumstances’. For more information about requests to consider ‘special circumstances’ contact the Australian Passport Information Service on 13 12 32 or go to www.passports.gov.au.

If you have tried to speak to the father about moving and they oppose your proposal, we can help you to mediate a decision about relocation and may help you to reach an agreement without having to seek a relocation order through the courts. If you need advice on relocation orders, contact us today.

We can discuss your position in a free consultation; and there is no obligation to proceed with us after this free session.

The Family Court website has information on this topic: http://www.familycourt.gov.au/wps/wcm/connect/fcoaweb/family-law-matters/parenting/relocation-and-travel/

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Family and Federal Circuit Court Merger

Attorney-General Christian Porter unveiled plans for merging the new Federal Circuit and Family Court in May 2018. Since then there has been considerable passionate debate over the pros and cons of such a move. We can’t be sure of how this will effect waiting lists and the time it takes to resolve a Family Law matter. No matter which way it goes, it is a timely reminder that we need to work hard to resolve disputes before having to go to court.

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