The ATO debt was hers alone. The property split still made both of them carry it.
Your client’s spouse owes the ATO $4.2 million. Your client owes none of it. When the marriage ends, does your client share that debt?
Many advisers would say no. It is the spouse’s tax, on the spouse’s income.
In Joubert, the answer was yes. The wife alone owed the ATO, but the property split shared the burden. What largely decided it was not whose name was on the debt. It was who got the benefit of the income.
Joubert & Bottari (No 5) [2026] FedCFamC1F 402.
What happened
The couple’s assets came almost solely from the wife’s business acumen [278]. Their house was valued at $35 million [121].
She finished the house with dividends from her companies rather than by borrowing. She expected to be able to pay the tax because the business was then doing so well [293].
The debt built up from 2014 to 2022 [292]. By the hearing, she owed the ATO about $4.2 million, after $4.59 million was paid under consent orders [291]. The debt was hers, not her husband’s [189].
Why both of them carried it
The judge said the benefit of the unpaid tax sat in the house, which both of them owned [294].
She was the major breadwinner, so the unpaid tax benefited both of them. Almost all of it arose during the relationship [294]. That pointed “very strongly” to both of them bearing it [295].
She remained legally obliged to pay the ATO [301]. But the burden was shared on the balance sheet, because the income was used for the benefit of both [304].
The split was 80 per cent to her and 20 per cent to him [305]. In effect, he carried a fifth of her $4.2 million tax debt, about $840,000.
Pratley, two days later
Two days later, another judge of the same court reached the opposite result on different facts.
Pratley & Pratley (No 9) [2026] FedCFamC1F 398.
There the husband’s tax debts arose after separation, on income he could largely use as he chose. The wife did not share them off the top of the pool, though they still counted in his current and future circumstances.
Both are first instance decisions.
The practical takeaway
For advisers whose clients have unpaid tax, the question in a separation may be what the income paid for.
General information only. This note was accurate when written. The law may have changed since and the note is not updated. It is not legal or tax advice, does not take account of your circumstances and must not be relied upon as a substitute for advice on your own matter. If the issue is live for you or your client, email arda@nortonquaytaxlaw.com.au for advice on the current position.