This is one of the big questions that pops up sooner or later around separation.
Some client’s aren’t sure how the process works at all, and there are quite a few misconceptions out there. For example, “property” is not just real estate but includes superannuation and debts as well. Also, there are also no automatic outcomes under Australian law, there is no "everything is 50% / 50%” and no “the parent with the kids gets at least 60%”.
Here we give an overview of how property settlement generally takes place in Australia.
The first step in the process is for the Court to consider the legal ownership for all of the parties assets, liabilities and superannuation interests. If the Court decides that leaving these things “as they are” is not a fair outcome for one of the parties, then the Court embarks on a process to decide what legal rights need to be adjusted to provide a fair outcome. They do this by using a 4 step process which is set out below.
Step#1 - The property pool
In most cases, the Court makes a list of all of the assets, superannuation and debts of both parties, the current legal ownership rights, and identifies the current value of all of the property in this list. This list is called the property pool and it is valued as at the present date (not the date of separation). There are some exceptions, such as where one asset might be kept separate in what is referred to as a “two pools approach”.
By adding the assets and superannuation together, subtracting the debts, we reach the “total net property pool” of the parties.
Step#2 - Contributions
The Court looks at both the financial and non-financial contributions of the parties.
The financial contributions can include the net value of assets a person brought into the relationship (called an “initial contribution”), the income they earnt by working or through investments, or any lump sum amounts received such as gifts, inheritances, compensation payments etc.
The non-financial contributions can include looking after children of the relationship, working in a business of the parties unpaid (such as admin or accounting tasks for a sole trader or small business), taking time to support one party to build a business, or by manual contributions such as labour on renovations to a property.
Neither has more weight that the other, financial and non-financial contributions are considered equal in value.
The Court will not look at what a party paid for, it’s about what each party contributed. However, in some exceptional cases there are exceptions where one party causes serious loss.
The Court then balances those contributions and concerts them to a percentage that each party has contributed to the property pool.
Step #3 - Future needs
The court can adjust the percentage each party receives to take into account their circumstances in future as set out in section 75(2) of the Family Law Act 1975. These are sometimes referred to as “75(2) factors’ or “future needs adjustments”. There are 19 in total, the common factors leading to an adjustment of the percentages are:
the age and health of each of the parties
the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment
The care and control of a child of the marriage or commitment to support the party, another child or other person
The eligibility of a party for a pension, allowance or benefit
the payment of maintenance to one party to enable them to obtain education or training or otherwise obtain adequate income
the duration of marriage and impact upon the earning capacity upon a party
protecting a party who wishes to continue their role as a parent
if either party is living with another person
any child support to be provided
or “any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account”
Step #4 - is the division fair
Once there has been a division of the total net property pool to achieve the final percentage that the Court has arrived at, the Court takes a look at the overall outcome and may make any adjustments or allowances to ensure the outcome is ‘just and equitable’ to the parties
Time Limits
There is a time limit for bringing a claim for property settlement against your former spouse or partner. The limitation times are;
De facto: up to 2 years after separation
Marriage: up to 12 months after the divorce Order becomes final
If there is a Consent Order or Financial Agreement, then you have a final and legally binding property settlement (though for Financial Agreements this may depend on the terms of the agreement). That will stop any future claims for settlement by either you or your former partner or spouse, unless they are set aside by the Court.
How does this apply to you?
If you would like an analysis of your circumstances or to ask any questions, do not hesitate to call or contact us for a free call or an Initial Consultation.
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