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Decision of Commissioner of Taxation v Tomaras

High Court decision of Commissioner of Taxation v Tomaras [2018] HCA 62


Commissioner of Taxation v Tomaras

Tax debts of the parties to a marriage or de facto relationship are usually either retained by the party who has the debt or otherwise paid out of the parties’ combined asset pool as part of a final property settlement.

Under section 90AE of the Family Law Act 1975 (Cth), the Court has the power to make Orders to substitute one party to a relationship for the other party’s debt. The substituted party then becomes responsible for discharging the debt.

In the recent High Court decision of Commissioner of Taxation v Tomaras [2018] HCA 62, the Court considered whether it had the power to order the Husband to be substituted for the Wife with respect to a tax debt owed by the Wife.


By way of background, the parties were married in 1992 and separated in 2009. During the marriage, the Commissioner issued an assessment against the Wife regarding income tax and Medicare levies.

In late 2009, the Commissioner obtained a default judgement against the Wife in the sum of $256,078. The Wife failed to pay the judgement debt.

In late 2013, the Husband became bankrupt. Shortly thereafter, the Wife commenced proceedings in the Federal Circuit Court seeking Orders to alter the interests of the parties pursuant to s79 of the Family Law Act 1975 (Cth).

In February 2016 the Commissioner was granted leave to intervene in the proceedings.

The Wife sought an order pursuant to s 90AE(1)(b) of the Family Law Act 1975 (Cth) to replace the Husband for herself as the debtor.


The Full Court of the Family Court concluded the Court did have jurisdiction to order that the Commissioner replace the Husband for the Wife in relation to the Wife’s tax debt.

In the case stated, the High Court unanimously upheld the decision of the Full Court.  However, the High Court maintained in its judgment a court must be satisfied it is appropriate to make such an order:

“The difficulties for any court faced with a request, in relation to a debt owed to the Commonwealth under a taxation law, that it make an order under s 90AE(1) that one party to the marriage be substituted for the other party as the debtor are that these (and other) aspects of the taxation law would appear to prevent a court being satisfied of the two matters identified in s 90AE(3)(b) and (d) – that it is not foreseeable that making the order would result in the debt not being paid in full; and that, in all the circumstances, it is just and equitable to make the order. 

The fact that the husband in this appeal was bankrupt is reason enough not to make the order sought by the wife under s 90AE.  But there are other facts, matters and circumstances which compel the same conclusion in this appeal:  the inability of the husband to exercise the Pt IVC rights of objection and review (both because the time allowed to the wife for objections has long expired, and because of the difficulties identified above); the fact that the debt owed to the Commonwealth, in relation to which the Commissioner has obtained default judgment, is long overdue; and the fact that the size of that Commonwealth debt continues to increase, not just on a daily basis, but at a higher rate, because of the accruing GIC.  That list is not and cannot be exhaustive.  However, those facts and matters, or even some of them, compel the conclusion that a court could not be satisfied of the matters prescribed in s 90AE(3) and, therefore, the court would not be empowered to make a substitution order under s 90AE(1) in Pt VIIIAA.”

Importantly, the High Court also not­ed that ​“there will seldom, if ever, be occasion to exercise that power and adversely affect the commissioner or other creditors”.

Angela Hayes I Lawyer

E: angela.hayes@kimwilson.com.au


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