In Australian family law, financial disclosure is a fundamental requirement during property settlement and spousal maintenance proceedings. Each party must provide full and frank disclosure of their financial position to ensure a fair and equitable outcome—whether through the Court, negotiation, or mediation.
This obligation becomes more complex when one or both parties own or are involved in a business.
Why Business Ownership Complicates Financial Disclosure
Unlike straightforward assets such as real estate, bank accounts, or superannuation, the value of a business can be difficult to determine. Businesses vary significantly in size, structure, profitability, and complexity.
In many cases, a business provides not only income but also personal benefits—such as vehicles, accommodation, or payment of private expenses. These benefits often don’t appear in standard income or tax records, which can lead to disputes about a party’s true financial situation.
What Must Be Disclosed
Under the Federal Circuit and Family Court of Australia (Family Law) Rules 2021, parties must disclose all financial interests, including those held in businesses, companies, partnerships, and trusts.
This includes providing:
- Financial statements and tax returns
- BAS statements and loan agreements
- Trust deeds and company constitutions
- Records showing how the business is structured and operated
If a party is a director, shareholder, trustee, or beneficiary, they must also disclose documents that clarify their role, level of control, and any financial benefits they receive.
When Reported Income Doesn’t Match Lifestyle
A common red flag arises when a party declares a low income but continues to maintain a high standard of living. This may suggest that income is being retained within a business or that personal expenses are being paid through business accounts.
In some cases, business or trust structures are deliberately used to minimise reported income or obscure asset ownership. This can significantly affect child support, spousal maintenance, and property settlement entitlements.
The Role of Forensic Accountants
To assist in these situations, the Court may appoint a forensic accountant to conduct a thorough analysis. Forensic accountants review financial records, assess reported income, and provide an independent valuation of the business.
Their findings can be critical in understanding the true financial position of a party and are often relied upon in contested financial proceedings.
The Complexity of Discretionary Trusts
When a business is operated through a discretionary trust, the financial analysis becomes more complicated. Trusts are sometimes used to separate legal ownership from actual control and benefit.
However, the Family Court will look at who effectively controls the trust and whether a party has received—or can reasonably expect to receive—financial benefits. If so, the trust may be included in the asset pool for division, regardless of legal title.
Ongoing Disclosure Obligations
It’s important to remember that the duty of financial disclosure is not a one-off obligation. It is ongoing throughout the proceedings. Parties must update their disclosure if their financial circumstances change.
- Failing to comply with disclosure obligations can result in serious consequences, including:
- Cost orders
- Negative findings about credibility
- Re-opening of settled matters
- A reduced share of the property pool
Transparency Is Key
Proper financial disclosure is essential to the fairness and integrity of family law proceedings. When business interests are involved, full and accurate disclosure helps ensure that both parties are treated fairly and that the outcome reflects each party’s actual financial position.
If you or your former partner owns a business and you’re navigating a property settlement, it’s crucial to seek legal advice early to protect your interests and ensure compliance with your disclosure obligations.
