Marriage or relationship breakdown payments

Transfers of property and other payments related to a marriage or relationship breakdown are caught by Division 7A, even though they may be non-voluntary. A deemed dividend may arise.

Example 6

Jack and Stephanie divorce. Stephanie owns and controls private company BCD Pty Ltd. The Family Court orders Stephanie to transfer the private company's motor vehicle to Jack as part of the property settlement.

For the 2006-07 and later income years, dividends arising from family law obligations may be frankable by the private company taken to pay the dividend.

The dividend may be franked irrespective of whether it was made to a shareholder or associate of the shareholder. The recipient is treated as a member of the private company.

Examples of where deemed dividends may be franked include:

  • a court order under the Family Law Act 1975 or a corresponding foreign law
  • a maintenance agreement approved by a court under section 87 of that Act, or a corresponding agreement approved by a court under a corresponding foreign law
  • a court order under state, territory or foreign law relating to de facto marriage breakdowns.
    Last modified: 27 Jul 2016QC 17340