When it comes to a property settlement during divorce, there is a major need for transparency to ensure that the division of marital assets and liabilities results in a fair outcome. The law has enshrined the legal obligation for full and frank disclosure of all assets that might form part of the matrimonial “pool”. But sometimes, there can be a deliberate failure by a spouse to disclose some assets, or action taken by a spouse to have assets “disappear” until after a settlement is finalised. What are some of the ways this can happen, and what can you do about hidden financial assets in divorce? Let’s take a look.
In relation to financial matters, full and frank disclosure means providing all information regarding income and other sources of earnings, property and other asserts, family trusts, companies and other structure. Any property disposal (whether by sale, transfer, assignment or gift) made since separation must also be disclosed. The duty to disclosure usually includes providing your ex with copies of your financial documents including tax returns, bank statements, pay slips and superannuation statements.
Under new laws this year, the Australian Taxation Office can also provide information on superannuation accounts to divorcing couples, making it much harder to hide superannuation.
What happens if you don’t fully disclose?
If a party doesn’t comply with the duty of disclosure or files false information and this is then discovered, courts have the discretion to do a number of things, including order costs against that party or even fining or imprisoning a party who is found guilty of contempt of court for their failure to disclose documents.
A non-fully disclosing spouse will find a court judges their overall credibility harshly. The non-discloser can find themselves penalised in the property settlement because of the suspicions that there are other assets or income which haven’t been disclosed. The other spouse might be given more of what is visible and readily available simply because the true picture may never be known.
How do people hide assets?
There are variety of methods, some more creative than others. These might include:
- Reducing bank account balances by buying new assets or making loans to family/friends which are intended to be repaid after the settlement is finalised.
- Outright gifts to friends and family
- Having employers delay payment of commissions, bonuses or incentives so that they aren’t accounted for during the settlement.
- Deliberately underreporting income
- Manipulation of financial records or company books (eg. in a family business) to appear less profitable
- Investing money in a new business, such as by creating a similar business in someone else’s name and draining the existing business of assets and clients (though this can be hard to hide since there is typically a need to borrow).
- Undervaluing assets
- Trying to hide money in cryptocurrencies
- Trying to hide money in trusts
- Moving assets off-shore so they are harder to trace
- Stashing cash or other valuables in safe deposit boxes, or even under the bed
What can you do to protect your interests?
Experts say prevention is the best cure, and therefore to take an active interest in your marital finances both when things are going well and if things are headed towards divorce. You’ll be much better placed to notice anything unusual going on.
You should be alert to situations where your ex has become very vague about certain aspects of finances, or has made any moves to restrict you or block you from being involved with a particular financial matter. Sometimes, it can be that in your marriage, your ex played a more controlling role in relation to finances and already limited your involvement in certain areas. So don’t be afraid to seek professional advice.
Family lawyers can advise you on any steps you need to take to protect assets and prevent disposal of them, and to identify assets a spouse might be trying to hide. They will help you get a full and accurate picture of you and your ex’s finances and help you work out if you have any legitimate reasons for concern or suspicion.
You might also hire a forensic accountant, who can investigate irregularities in spending, both personal and business. This can be an expensive process so you’ll need to weigh up whether the investment of time and funds to try to pursue hidden assets is worth it.
If you have any concerns over disclosure in your divorce, please call Canberra family lawyer Cristina Huesch or one of our other experienced solicitors here at Alliance Family Law on (02) 6223 2400.
Please note our blogs are not legal advice. For information on how to obtain the correct legal advice, please contact Alliance Family Law.
Read the Federal Circuit and Family Court of Australia’s factsheet on the duty of disclosure.