Whether you are married or in a de facto relationship, it is common for couples to acquire property together. However, when the relationship ends, disputes often arise regarding the division of assets and liabilities.

Legal Framework

The division of property upon the breakdown of a relationship is governed by specific legal frameworks, ensuring a fair and just allocation of assets. In Australia, the Family Law Act 1975 (Cth) provides the basis for property settlement arrangements for married couples and de-facto relationships, including same-sex couples. A property settlement refers to the financial settlement that takes place after a couple separates, determining “who gets what and why.” Legally, any settlement reached must be “just and equitable.”

Definition of Property

When determining the assets to be distributed, “property” includes:

• Real estate: This incorporates residential homes, investment properties, and any other type of real property, both acquired individually or jointly.

• Shares: Stocks held by either party, whether personally or in conjunction with others, need to be considered in the asset pool.

• Investments: This encompasses a broad range of financial instruments such as bonds, mutual funds, or interests in private companies.

• Bank accounts: All bank accounts, including savings, current, and fixed deposit accounts held by either party.

• Business valuations: In circumstances where either party owns a business, the value of that business will be factored into the property pool.

• Interests in companies and trusts: This includes any preferential shares, partnership interests, and beneficial interests in trusts.

• Superannuation: Under the Family Law Legislation Amendment (Superannuation) Act 2001 (Cth), superannuation interests are treated as property. This allows the court to make orders to either “split” or “flag” these interests, ensuring that they are divided between the parties in a manner that reflects their contributions and future needs.

Expert Evidence

In disputes involving significant assets, expert evidence may be required to determine the value of the property pool. This process involves:

• Valuation of all assets: Ensuring that every asset, including those that aren’t frequently traded on the open market, is accurately appraised. This might include valuation by professional property appraisers, financial analysts, or other relevant experts.

• Precision in valuation: Precise valuations are essential for determining a fair distribution and ensuring that both parties receive their due share. This includes considering the current market conditions and potential for future growth or depreciation of assets.

Assessing Contributions and Needs

In determining the division of property, the court evaluates:

Contributions

• Direct Financial Contributions: These are contributions made by each party that are financial in nature. Examples include property brought into the relationship, salary earnings, and any direct financial inputs towards purchasing assets.

• Indirect Financial Contributions: These contributions are financial but not directly measurable, such as gifts and inheritances received from family members, significant payment of debts, and other indirect financial support.

• Non-Financial Contributions: Contributions that are not financial but add substantial value to the property, such as renovations to a home, effective management of investments, running a family business, or maintenance activities.

• Contributions to the Welfare of the Family: This considers each party’s care for children, household maintenance, and support within the family framework, ensuring the welfare of all family members.

Future Needs

• Age and Health: Assessing the physical and mental health of each party, considering their age and potential for future health care and support needs.

• Income, Property, and Financial Resources: Reviewing the current and potential earning capacity of each party, including existing properties and financial resources.

• Ability to Work: Evaluating the capacity of each party to gain and sustain employment, considering their skills, qualifications, and job market conditions.

• Commitments: Considering necessary commitments for the support of themselves or others, such as elderly parents or dependent children.

• Standard of Living: Ensuring that the standard of living of each party following the separation is reasonable and reflective of the circumstances during the relationship.

• Course of Conduct: Taking into account any relevant conduct by the parties that the Court considers important in determining the settlement.

• Child Support: Any child support payments being made and the financial needs of the children.

Percentage Division and Distribution

Once a percentage division of the total asset pool is established, the method of distributing that percentage is considered. For example, if one party wishes to retain the family home, calculations will be made to determine the appropriate payment needed to balance the value of other assets and superannuation retained by each party.

Reaching a Financial Settlement

A financial settlement can be achieved through different mechanisms:

Agreement between the Parties

• Consent Orders: A written agreement approved by the court, making the agreement legally binding. This process involves filing the agreed terms with the court, after which the court formalises the orders.

• Financial Agreement: A written agreement that complies with specific legal requirements and can be made before, during, or after a relationship ends. These are also known as binding financial agreements (BFAs).

Court Orders

If no agreement can be reached, the court may order a financial settlement. Ensuring that any agreement is formalised is crucial for clarity and enforceability.

Reaching or Deciding a Family Law Property Case

It is generally advisable to reach your own agreement with your former spouse or partner if it is safe to do so. This approach can save both parties money, time, and stress. At Catron Simmons Lawyers, we focus on settling these matters effectively, as property settlements can be complex depending on the circumstances.

Methods to Reach a Property Settlement

1. Informal Agreement

   • An agreement negotiated directly between the parties without any formal legal documentation or court involvement. However, this kind of agreement is typically not legally enforceable without further formalisation.

2. Formal Agreement

   • Consent Orders: A written agreement that has been approved by the court, making it legally binding.
   • Financial Agreement: These written agreements comply with specific legal requirements and can be made before, during, or after a relationship ends.

3. Order of the Court

   • When the parties cannot reach an agreement, the court can make a property settlement order after considering various factors, including the financial and non-financial contributions of both parties, their future needs, and the welfare of any children involved.

Court’s Decision-Making Process

When deciding financial cases, the Court does not use a fixed formula to divide property and finances. Instead, if the parties cannot reach an agreement through dispute resolution, the case may proceed to a hearing where a judicial officer will make a decision based on what is considered just and equitable.

Key Principles Considered by the Court

• General Principles for Property Settlements

  • Marriages: Sections 79(4) and 75(2) of the Family Law Act guide the Court in making property settlements and determining spousal maintenance for marriages.
  • De facto Relationships: Sections 90SM(4) and 90SF(3) serve the same purpose for de facto relationships.

• Assets and Liabilities The Court considers the assets and liabilities of both parties, both individually and jointly, and their respective values.

• Contributions

  • Direct Financial Contributions: Including property brought into the relationship, wages, and salary earnings.
  • Indirect Financial Contributions: Like gifts and inheritances from family members.
  • Non-Financial Contributions: Contributions that add value, such as home renovations, managing investments, or running a business.
  • Contributions to the Welfare of the Family: Caring for children and performing household duties.

• Future Needs Factors considered include age, health, financial resources, caregiving responsibilities, and earning capacity.

• Maintenance Factors

  • Income, Property, and Financial Resources: Actual and potential earning capacity.
  • Age and Health: Physical and mental health of each party.
  • Ability to Work: Capacity for employment.
  • Commitments: Necessary support commitments.
  • Standard of Living: A reasonable standard of living given the circumstances.
  • Course of Conduct: Relevant conduct of the parties.
  • Child Support: Impact of child support payments.

The Court’s goal is to reach a decision that is just and equitable by considering the contributions and future needs of the parties. Sections 79(4) and 75(2) guide the Court in making property settlements and determining spousal maintenance for marriages, while Sections 90SM(4) and 90SF(3) serve the same purpose for de facto relationships. These provisions ensure that the unique circumstances and contributions of each party are fairly evaluated.

Individual Circumstances

The division of assets and debts will be unique to each case, depending on the specific circumstances of the family involved. Each settlement will likely differ from others due to the unique factors at play in each relationship.

An experienced family lawyer can provide an informed prediction of possible outcomes based on the specifics of your case, even though it is not possible to determine the exact orders a judicial officer will make.

Seeking Legal Advice Early

It is critical to seek legal advice as soon as possible. An experienced Family lawyer can provide you with a clear understanding of the processes, potential entitlements and help navigate the complexity of Family Law. At Catron Simmons Lawyers, we are committed to offering expert legal support and representation to help you achieve the best possible outcome.

If you need assistance or have questions about your situation, please contact us for a confidential consultation.