Whether you are married or in a de facto relationship, couples commonly acquire property together. However, when the relationship ends, disputes often arise over how to divide assets and liabilities.
Legal Framework
Specific legal frameworks govern the division of property when a relationship breaks down. As a result, these frameworks ensure a fair and just allocation of assets. In Australia, the Family Law Act 1975 (Cth) provides the basis for property settlement arrangements. It covers 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 the parties reach must be “just and equitable.”
Definition of Property
When determining the assets to distribute, “property” includes:
Real estate: Residential homes, investment properties, and any other type of real property — whether acquired individually or jointly.
Shares: Stocks either party holds, whether personally or in conjunction with others.
Investments: 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 either party holds.
Business valuations: If either party owns a business, the value of that business forms part of 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 count as property. As a result, the court can make orders to either “split” or “flag” these interests. In each case, the court divides them in a manner that reflects the parties’ contributions and future needs.
Expert Evidence
In disputes involving significant assets, the parties may need expert evidence to determine the value of the property pool. This process involves:
Valuation of all assets: A proper appraisal of every asset, including those that don’t frequently trade on the open market. This might include valuation by professional property appraisers, financial analysts, or other relevant experts.
Precision in valuation: Precise valuations matter for determining a fair distribution. In addition, both parties need confidence they’re receiving their due share. This includes considering current market conditions and the 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 financial contributions each party makes. For instance, 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. For example, gifts and inheritances from family members, significant payment of debts, and other indirect financial support.
Non-Financial Contributions: Contributions that aren’t financial but add substantial value to the property. For instance, home renovations, effective management of investments, running a family business, or maintenance activities.
Contributions to the Welfare of the Family: This covers each party’s care for children, household maintenance, and support within the family framework.
Future Needs
Age and Health: Each party’s physical and mental health, age, and potential future health care needs.
Income, Property, and Financial Resources: Current and potential earning capacity, including existing properties and financial resources.
Ability to Work: Each party’s capacity to gain and sustain employment, considering their skills, qualifications, and job market conditions.
Commitments: Necessary commitments for the support of themselves or others, such as ageing parents or dependent children.
Standard of Living: A reasonable standard of living following the separation, reflective of the circumstances during the relationship.
Course of Conduct: Any relevant conduct by the parties that the Court considers important.
Child Support: Any child support payments and the financial needs of the children.
Percentage Division and Distribution
Once the parties (or the court) establish a percentage division of the total asset pool, the next question is how to distribute it. For example, if one party wishes to retain the family home, the parties will calculate the appropriate payment to balance the value of other assets and superannuation each party retains.
Reaching a Financial Settlement
Parties can reach a financial settlement through different mechanisms:
Agreement between the Parties
Consent Orders: A written agreement the court approves, making it legally binding. This process involves filing the agreed terms with the court. After that, the court formalises the orders.
Financial Agreement: A written agreement that complies with specific legal requirements. The parties can enter into one before, during, or after a relationship ends. These are also known as binding financial agreements (BFAs).
Court Orders
If the parties can’t reach an agreement, the court may order a financial settlement. In either case, formalising any agreement matters for clarity and enforceability.
Reaching or Deciding a Family Law Property Case
Generally, parties should reach their own agreement with a former spouse or partner if it is safe to do so. As a result, this approach can save both parties money, time, and stress. At Catron Simmons Lawyers, we focus on settling these matters effectively. After all, property settlements can be complex depending on the circumstances.
Methods to Reach a Property Settlement
Informal Agreement
An agreement the parties negotiate directly, without any formal legal documentation or court involvement. However, this kind of agreement typically isn’t legally enforceable without further formalisation.
Formal Agreement
Consent Orders: A written agreement the court has approved, making it legally binding.
Financial Agreement: A written agreement that complies with specific legal requirements. The parties can enter into one before, during, or after a relationship ends.
Order of the Court
When the parties can’t reach an agreement, the court can make a property settlement order. In doing so, the court considers various factors. These include 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 doesn’t apply a fixed formula. Instead, if the parties can’t reach an agreement through dispute resolution, the case may proceed to a hearing. At that hearing, a judicial officer makes a decision based on what is 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.
De facto Relationships: Sections 90SM(4) and 90SF(3) serve the same purpose for de facto relationships.
Assets and Liabilities: The Court considers both parties’ assets and liabilities, individually and jointly, and their respective values.
Contributions
Direct Financial Contributions: Property brought into the relationship, wages, and salary earnings.
Indirect Financial Contributions: For instance, gifts and inheritances from family members.
Non-Financial Contributions: Contributions that add value — for example, home renovations, managing investments, or running a business.
Contributions to the Welfare of the Family: Caring for children and performing household duties.
Future Needs
The Court considers age, health, financial resources, caregiving responsibilities, and earning capacity.
Maintenance Factors
Income, Property, and Financial Resources: Actual and potential earning capacity.
Age and Health: Each party’s physical and mental health.
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: The impact of child support payments.
The Court’s goal is a decision that is just and equitable. To achieve this, the Court considers both the contributions and future needs of the parties. Sections 79(4) and 75(2) guide property settlements and spousal maintenance for marriages. Similarly, Sections 90SM(4) and 90SF(3) cover de facto relationships. Together, these provisions ensure that each party’s unique circumstances and contributions get a fair evaluation.
Individual Circumstances
The division of assets and debts will be unique to each case, depending on the specific circumstances of the family involved. Consequently, each settlement will likely differ from others due to the unique factors at play in each relationship.
An experienced family lawyer can give you an informed prediction of possible outcomes based on the specifics of your case. That said, no lawyer can tell you exactly what 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 give you a clear understanding of the processes and your potential entitlements. In addition, we can help you 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.