Separation often erodes trust between former partners, and that can spill into property settlement proceedings. One party may start to suspect the other is hiding assets, particularly if they know less about the relationship’s finances than their former partner does.
In this article, we look at how assets can be hidden during separation, the penalties for hiding them, and what you can do if you think it’s happening to you.
Key takeaways
The Court can impose various penalties on a non-disclosing party for hiding assets.
Parties can use different ways to try to conceal assets during a property proceeding.
The Court has tools it can use to discover if a party is hiding an asset.
Financial disclosure is a critical part of the settlement process.
There are several things you can do if you think assets are being hidden.
What counts as hiding assets?
Hiding assets refers to a party taking steps to prevent an asset or financial resource from being included in an Australian family law proceeding. This article focuses on assets that are deliberately hidden, though failing to fully disclose your financial position through carelessness can also lead to legal consequences. Every party to a property settlement has a legal duty to make sure that they meet their obligations under the Family Law Act.
What is the penalty for hiding assets in divorce Australia?
The Federal Circuit and Family Court of Australia (FCFCOA) wants parties to be able to divide their asset pool with a fair property settlement. If the FCFCOA suspects hidden assets, it has the ability to apply serious legal penalties to the offending party.
Consequences for Hiding Assets
The Court may impose penalties on a party found to have hidden assets during a property settlement. Depending on the circumstances, the Court may do any of the following.
Contempt of Court
Contempt of Court is the willful disobedience or disregard of court orders or the Court’s authority. An individual can be found in contempt of Court if they deliberately fail to disclose assets or provide false information about their financial records, which they are legally required to give honestly.
There are serious consequences for this breach. The offending party may face fines or even imprisonment in extreme cases.
Cost Orders
Cost orders refer to the Court’s decision to require one party to pay the legal costs incurred by the other party. Generally, each party bears their legal costs in a family law case. However, in cases where the conduct of one party has caused additional legal expenses for the other party, the Court may make an exception.
Usually, lawyers use the scales of costs for the relevant court to determine what to charge. If the respondent disputes the cost, the Court can appoint a costs assessor. This independent person will consider the objections and decide on a fair amount.
Adverse Inferences
If the Court finds you skewed the asset pool through non-disclosure, it may draw adverse inferences. The Court must decide how to handle undisclosed, unvalued financial resources.
The evidence of undisclosed assets often suggests their value. For example, losses documented on a gambling site or unusual investment activity can indicate a value the Court can rely on. The Court may also consider circumstances like a luxurious lifestyle that suggests a broad monetary value. The FCFCOA may then make an adjustment to a property order in favour of the aggrieved party.
The respondent may complain that the Court overestimated the value of the concealed assets. However, the Court is typically unsympathetic to these complaints. It’s more concerned with the aggrieved party being properly compensated.
How Do Parties Hide Assets?
There are several ways a party to a divorce can hide assets.
Transferring Assets
Transferring assets involves moving ownership of property, money, or investments from personal possession into someone else’s. This will often be a trusted friend, family member, or business associate. This strategy prevents these assets from being considered in the settlement and protects them from division or claim by the other spouse.
There are several ways to transfer assets, including:
Transferring money to another person’s bank account.
Signing over the titles of vehicles, real estate, or other property.
Transferring stocks, bonds, or shares in a business.
The individual who transferred the assets may deny the existence of these assets or claim they were lost, spent, or never existed. The party will then reclaim the assets after the property settlement is finalised.
Investing in Assets That Are Difficult to Value
This strategy involves buying items or investments that are not easily appraised or whose value is not readily apparent. The primary goal is to obscure their true worth. This makes it challenging for the other spouse or legal professionals to assess and divide them accurately during the divorce.
Some assets used for this purpose may include:
Artwork and antiques.
Rare collectibles (coins, stamps, vintage cars).
Jewellery and precious stones.
High-end wines or spirits.
Intellectual property rights.
Over-the-counter (OTC) securities or non-publicly traded stocks.
These assets are often purchased without the other party’s knowledge. Depending on the asset, they may be concealed in a storage facility or secret offshore accounts. This makes them hard to trace.
The value of these assets can be highly subjective or fluctuate significantly. They may also be difficult to liquidate, making them more complex to deal with in a settlement.
Delaying promotions or bonuses
Individuals may collaborate with their employer to postpone receiving increased income or bonuses until after the settlement is finalised. This minimises the individual’s apparent income and assets during the divorce. This tactic reduces the amount that the other spouse can claim.
The party can delay promotions or bonuses by:
Holding off on signing official documents related to the promotion or raise.
Deferring bonus payments to a future date.
Temporarily reducing the number of working hours or taking unpaid leave to show a decrease in income.
Artificially reducing earning capacity can affect child support, spousal maintenance calculations, and asset division. After the settlement, the party may receive their bonus as a lump sum or begin in a higher-paid position.
How the FCFCOA may uncover hidden assets
The Court has various ways it can determine if a party has failed to meet their disclosure obligations. Some of its key tools include the following.
Subpoenas
The Court can issue an order that requires people and financial institutions to provide information or give evidence during a court hearing. Subpoenas could be issued to parties such as banks, superannuation funds, employers, and accountants. This may help find evidence of financial interests, such as:
Bank accounts.
Additional superannuation interests.
Gifts or transfers made to third parties.
Forensic accountants
Forensic accounting can provide important evidence in cases involving more complex property matters. Significant assets like trusts and businesses can sometimes be used to manage finances in a way that conceals their value or ownership. A forensic accountant may track money through different accounts, review business records to discover unusual activity, or use other means.
Lifestyle evidence
The Court can look at whether the lifestyle a party is leading matches their disclosed income. If a party is claiming to only have a modest income, but is buying luxury items and taking lavish holidays, that could catch the FCFCOA’s attention. They may be asked to explain these purchases at a hearing.
Questioning under oath
All parties are obliged to be truthful when giving evidence during a court hearing. They can be asked about various issues, such as the handling of a particular asset or how a valuation was obtained. There are significant consequences for lying to the Court. It can change how the FCFCOA decides on the division and may even lead to criminal proceedings.
Full and frank financial disclosure of assets
The Family Law Act requires that the parties to a property proceeding provide “full and frank” disclosure. Failing to do so can result in severe penalties and further costs.
Parties provide all the relevant financial information and documents during the disclosure process. This disclosure will include information that the other party may not know. This documentation contains information recorded on paper or stored by other means, such as on a computer or storage device.
The obligation requires disclosing all sources of income and property interests. This could include property that’s currently owned or disposed of by sale, transfer or gift. Other financial resources held in the party’s name or owned by companies, trusts or other structures under which the party derives a benefit are also subject to disclosure.
Disclosure of Financial Circumstances requires that each party complete a financial statement. This provides details of all assets, liabilities, and financial resources in their name or held jointly with another party. The rules also require that parties file an amended financial statement if their financial circumstances significantly change during the proceeding.
Each party can request relevant financial documents from the other party. These may include:
Bank statements.
Superannuation statements.
Tax returns and pay slips.
Property valuations.
Insurance policies.
Share certificates.
Trust deeds.
Business or company documents.
Title deeds and lease agreements.
Failing to comply with disclosure requirements is a severe breach of a party’s legal obligations. There is a range of penalties the Court can levy.
When the Court makes an order to divide property, the order is binding. Neither party can generally attempt to “revisit” the outcome at a future date. However, evidence of hidden assets can be grounds to have an order set aside.
Full and frank disclosure by parties to the proceedings generally means they can negotiate (or the Court can make orders) over an accurate property pool. This is important for a fair divorce settlement.
What can you do if you suspect your spouse is hiding assets?
If you believe that your partner is not being forthcoming about their finances, there are various things you can do, including:
Seek legal advice early. Uncovering assets can be a complicated affair. Working with an experienced family lawyer can be crucial to avoid missteps and keep the settlement process above board.
Get an injunction. This is an order that prevents a party from selling or transferring property. This can be a useful way to preserve assets until the Court can make a decision on a final property order.
Keep clear records. Having documentation available about business interests and other assets can support your ability to trace suspicious activity.
Monitor joint accounts to determine if your partner is making unusual withdrawals that may be an attempt to hide money.
Keep an eye on your partner’s social media accounts. There are times when a party posts about an expensive holiday they’ve been on or a large purchase they’ve made. This can be important evidence that contradicts claims about the assets they have access to during a divorce proceeding.
To gain more knowledge about the division of assets in Australia, read this blog: How Are Assets Divided in a Divorce Australia?
Conclusion
Hidden assets can be a severe issue in financial settlements. There are several ways a party can hide a financial resource. However, if non-disclosure is discovered during court proceedings, there can be a significant penalty for hiding assets in divorce. The bottom line is that everyone should fulfil their duty to disclose all of their assets.
There are many possible twists and turns in gaining full disclosure. We recommend seeking professional advice and assistance to get a fair outcome.
If you suspect your former partner is hiding assets, contact us for a free discovery call to talk through your options.
The above information is intended to be general advice only and is not a substitute for personalised advice. Because it does not consider your individual circumstances, it is not intended to be relied upon and any loss or damage arising from any such reliance is disclaimed. Any financial or legal decisions should only occur after you have received tailored advice from a legal or financial professional.
Are you looking for family lawyers?
Shanahan Family Law has been helping Sunshine Coast families through separation since 2009. We listen closely, tailor our approach to your circumstances, and work with you towards a fair outcome.
