A recent High Court decision, Bosanac v Commissioner of Taxation [2022] HCA 34, delivered on 12 October 2022 has upheld two important presumptions in equity, these being the presumption of resulting trust and the presumption of advancement. 

Protecting the family home

Background

In 2006 the Bosanac’s purchased their $4.5 million home in Perth via a joint deposit of $250,000 and a joint loan facility. However, Mrs Bosanac was registered as the sole legal proprietor of the property.

The couple resided at the property during their marriage and in 2015 the couple separated. Following their separation, Mrs Bosanac continued to reside at the property whilst Mr Bosanac moved out. 

Mr Bosanac had outstanding tax debts with the ATO and as such, the ATO argued that 50% of the beneficial interest in the home was held on trust for Mr Bosanac’s benefit and should be accessible to the ATO to settle Mr Bosanac’s outstanding debt. 

However, Mrs Bosanac argued that the ‘presumption of advancement’ applied to the effect that any contribution made by Mr Bosanac to the property was a non-recoverable gift to Mrs Bosanac.

The Full Federal Court’s decision overturned the previous Federal Court decision, concluding that there was no presumption of advancement and hence there was a resulting trust. Therefore, the ATO was able to recover a tax debt owed by Mr Bosanac against his former family home, despite that home being legally registered in the name of Mrs Bosanac. 

The presumptionsOn 23 February 2022, the Australian Taxation Office (ATO) issued long awaited guidance on discretionary trusts and the application and operation of section 100A.

A presumption of resulting trust arises because the law of equity assumes that we do not intend to make gifts through financial contributions when buying a property. Therefore if a husband purchases a property solely in his wife’s name, equity will assume that the wife is holding the property on resulting trust for the husband. 

However, the presumption of advancement is an exception to the above presumption of resulting trust. Simply put, the presumption of advancement assumes that because a certain relationship exists between husband and wife, the husband does intend to gift his wife full ownership of the property. 

It is important to note that the presumptions are limited to advancements from husband to wife and because of this many (including the High Court) have critiqued that the presumption is outdated.

High Court decision

The High Court concluded that it was the intention for Mrs Bosanac to be the sole beneficial owner of the property and in doing so reaffirmed the presumption of advancement.

Importantly, the High Court highlighted the importance of the facts of the case, in particular the couple’s words and conduct at the time of the transaction.  

Key takeaway 

Although the High Court acknowledged that the presumption of advancement had been weakened over time and observed that it should possibly apply in transfers of property not just from husband to wife, but also to spouses more generally (including same-sex marriages), it confirmed that it still exists. 

Therefore, for now, the legal and beneficial owner of the property will remain the purchaser of the property (despite who has actually contributed to the property). However, it is important to note that critical to any decision are the actual facts of the case and the actions of the parties concerned. 

For more information 

For more information, please reach out to your local RSM office.