Overseas assets in Australian property settlement
In our increasingly globalised society, relationships between people from different countries are more common than ever before.
When these relationships break down there will often be issues regarding the parties’ assets will be dealt with particularly where those assets are in different countries.
The Family Courts of Australia and the Federal Circuit Court of Australia (“Australian Family Courts”) determine how the property of a relationship should be divided upon separation by using a number of steps.
- Considering whether there should be any alteration of the parties’ interests at all;
- Ascertaining the net asset pool of the parties;
- Assessing the financial and non-financial contributions of both parties;
- Assessing various adjustment factors including the future needs of the parties; and
- Considering the practical effect of the proposed property settlement and whether the settlement is just and equitable for both parties.
It may come as a surprise to a lot of people that if you have assets overseas, the Australian Family Courts will generally take those assets into account in any settlement of property between you and your former spouse following the breakdown of your relationship.
This is the case even where you think the asset is well outside the jurisdiction, and perhaps beyond the reach and power, of the Australian Family Courts which exclusively deal with all matrimonial causes in Australia.
The Family Law Act 1975 (“the Act”) defines “property” very broadly as “property to which those parties are, or that party is, as the case may be, entitled”.
So, whether you have landed in India, the USA, the United Kingdom, Italy or Greece or China, or that proverbial Swiss bank account, that asset is counted as “property” in your “property settlement” even if you consider that your spouse has no entitlement to it or you believe that foreign jurisdiction will take no notice of what the Courts will do or say about the matter.
The Australian Family Courts have express jurisdiction to make orders concerning international assets by virtue of section 31(2) of the Act which states the jurisdiction of the Courts “may be exercised in relation to persons or things outside Australia and the territories”.
The duty of disclosure
In any property settlement proceedings under the Act, you have a duty to make full and frank disclosure of your financial affairs, including any assets you own or have an interest in, and your financial resources.
A failure to disclose assets, including those overseas may lead to the Australian Family Court setting aside a settlement agreement or final property order and opening up the proceedings all over again. This may also result in a cost order or further adjustment of how the assets were originally split.
Proper disclosure allows the Australian Family Courts to make an order “adjusting” the property interests of the parties between them without necessarily involving the control of or exercising jurisdiction over the foreign asset.
For example, if you openly and candidly disclose that you have an interest in land in the UK or Italy, provided there is sufficient evidence of the value of that interest, that value can be taken into account in the settlement or the final property order which otherwise affects how the Australian assets are divided.
In some cases, the foreign assets are significant compared to the Australian assets, and there can be issues surrounding whether the Australian jurisdiction or the overseas jurisdiction should apply.
When dealing with international family law matters in relation to property proceedings, the two main issues are:
- Which Court has jurisdiction?
- Which Court is the most appropriate forum?
Where the parties are Australian residents, proceedings are usually dealt with in the Australian Courts even if one or both of the parties may not be Australian citizens.
Jurisdiction and the appropriate forum are usually determined by the “closest connection” test. This test means that the country in which the separated or divorced parties have the closest connection, for example where they usually live or where most of their assets are, will be the judicial system that determines their matter.
As stated above, the Australian Family Courts may make orders in relation to property in an overseas jurisdiction.
However, property settlement orders made by the Australian Family Courts may not be automatically recognised and enforceable in the overseas jurisdiction, and problems may be experienced in enforcing the property settlement orders internationally.