“And there were a lot of sleepless nights and a few kilograms gained, chowing down on TimTams in the late evening as I dealt with the distress and trauma of doing that.”

According to the Australian Bureau of Statistics (ABS), the Australian divorce rate stands at 2.2 per 1,000 Australian residents. In 2021, more than 56,000 divorces were granted in Australia, an increase of 13.6 per cent from 2020. As structures evolve over time and are usually established with little or no consideration of the possibility of divorce, Mr Wallis said the issue of divorce is a critical topic that will impact the clients of all SME practitioners at some point.

Family lawyers v tax practitioners

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There’s an interesting dynamic between family lawyers and tax practitioners, Mr Wallis pointed out.

“Family lawyers tend to believe that tax agents wouldn’t know conflict if it hit them between the eyes”, and tax practitioners think that “family lawyers don’t know anything about tax and yet ignore our tax advice”, he said.

“Unless you have a legal duty to do so, you must not disclose any information relating to a client’s affairs to a third party, including a family lawyer, without your client’s permission.”

Tax practitioners must operate within strict bounds, according to Mr Wallis.

“As a tax agent, you have a lot of constraints, as do family lawyers. You have the Tax Practitioners Board on your shoulder. You have the APESB (Accounting Professional and Ethical Standards Board) and the client obligations that flow from that,” he said.

“You also have your engagement letter and what it says about handling conflicts of interest. At the same time, you have your professional indemnity insurance policy considerations too. So that’s your straitjacket.”

Calling out family lawyers who don’t comply

“Has anybody ever looked at the rules and regulations for family lawyers? They’re fascinating. Rule 12, which deals with legal costs in a family law matter, demands they be fairly reasonable and proportionately incurred,” Mr Wallis said.

“I know of a matter where the two parties had made 27 applications to the court. They had run up $660,000 in fees. They spent $660,000 fighting over $900,000, and they still hadn’t gotten to a hearing. What the hell’s going on?

“What has to happen is the family lawyer has to lodge with the court before each application or each event in the matter, a statement or affidavit of the costs that have been incurred and how much of those costs have been paid for each party. So the information about the costs is always going to be there. I understand that some family lawyers routinely don’t comply, but no one calls it out.”

Therefore, a family lawyer’s duty to the court is paramount.

“That duty to the court must prevail over any duty to the client. For example, fabricating evidence may be in a client’s interest, as it may increase the client’s chances of succeeding in the claim,” Mr Wallis said.

“But a lawyer, as part of the duty to the court, cannot provide false evidence. The family lawyer cannot be a puppet for the client.”

When it comes to mediation, Mr Wallis added that “if the defendant lawyer is screwing around your client by not preparing properly for mediation, you have the obligation as a tax practitioner looking after your client’s best interest to call it out. Call out the practitioner.”

Family lawyers’ clients ‘need tax advice’

Mr Wallis also urged all family lawyers to direct their clients to get independent tax advice.

“Family lawyers need to tell their clients, ‘You need tax advice. I can’t give it because I’m not that good. But you need it.’,” he said.

Family court rules don’t provide a tax practitioner with a right to view documents; a court order is needed.

“Most firms were reporting that 90 to 95 per cent of the time, they were acting for both parties. Now, there’s absolutely nothing wrong with that, but you need to have adequate arrangements in place to manage tax conflicts of interest that may arise,” Mr Wallis added.

“There’s a really high likelihood that a tax agent is going to have a conflict of interest when a relationship breaks down. When you resolve the conflict of interest, you need a new fee engagement because now, if you’re acting for both, you must ensure you’re getting paid for both. And you might also come to the conclusion that you can’t act for both.”

Final advice: ‘Don’t be the frog in boiling water’

Mr Wallis concluded his discussion by emphasising that “tax agents, like family lawyers, are a mixed bag”.

“Some good, some bad. Before you start assisting a family lawyer to fabricate evidence, think about it: What’s the risk? What’s the reward? Is it worth saying yes to the request? What’s the long-term cost?” he said.

“It’s easier to call out [bad behaviour] earlier than later. Don’t be the frog in the boiling water. When you first work out that the family lawyer is not performing, call it out then. It’s much easier than doing it the day before mediation.”