Legal advice can help you determine what you might be entitled to. We often find that our clients are surprised when they first meet with us, and we make a preliminary assessment of their position – as it is in complete contrast to how much their former partner or spouse is suggesting they should agree to.
Our lawyers know that dividing your marital property often means parting with more than half of your assets, some with sentimental value and emotions attached. We listen carefully to your circumstances and your goals to get the outcomes you want. We create a strategy that guides you towards the best possible outcome for a fair and meaningful property & debt division.
In some cases, the separation or divorce process is amicable, and they are able to reach an agreement on the division of assets quickly.
Working out the asset pool is complex, and it may leave you feeling unsure and overwhelmed. Like fingerprints each property settlement is unique, and it is important to receive legal advice from a professional property settlement lawyer.
What is property settlement
Property settlement in family law is the arrangement made between the parties to a relationship, to divide assets, liabilities and financial resources.
Property can include almost anything of value, such as:
- Real property, such as the family home;
- Business interests;
- Trust interests;
- Jewellery, including wedding and engagement rings;
- Chattels, such as an above ground spa;
- Assets acquired through inheritance;
- Money; and
- The family pets.
Liabilities will also be divided between the parties, whether they are held jointly or individually, such as:
- Debts, like credit cards;
- Loans, such as a joint mortgage;
- Tax, such has Capital gains and
- Stamp duty obligations.
Assets which form part of property settlement are not limited to property acquired during the relationship. Property owned prior to and after the separation can be included in a property settlement, this includes superannuation.
The Family Law Act 1975 (Cth) (‘Act’) imposes a limitation period for parties seeking orders (contested or by consent) for a property division or spousal maintenance. This limitation is one year from the date of a divorce order taking effect or two years from the date of separation in the case of de facto couples.
How does the court decide how to divide assets and debts?
If the matter goes to court, the division of assets must be assessed and determined to be “just and equitable”. It is important to bear in mind that what a party considers fair, may not be how a court sees it. Therefore, we consider it a good starting point to assess likely division of assets awarded by a court and use that as a basis for providing advice as to what is a likely outcome. This helps set expectations and to achieve that outcome with minimal, or in some cases, no court involvement using other avenues such as negotiation and mediation.
Your entitlements with respect to your property settlement are based on the principles of property division set out in the Family Law Act 1975 (Cth) (“the Act”). The Court has a wide discretionary power based on the facts of each case.
There are five steps which are followed to determine a party’s entitlement to an adjustment of their interests in their or their spouse’s property as a result of the breakdown of a relationship. They are:
- To determine whether or not it is “just and equitable” to make any adjustment to the parties’ interests in the property available for division;
- To identify and value all the property that is available for division. This includes all assets, liabilities and superannuation of each party;
- To consider the financial and non-financial, both direct and indirect, contributions made by and on behalf of each of you to the acquisition, conservation or improvement of property. These contributions include homemaker and parenting contributions. The Court will generally assign a percentage to each party’s contributions, for example, 50% / 50%;
- To consider the future needs of each party, including:
- Whether either party has the care of a child of the relationship;
- The age and state of health of each of you;
- The income, property and financial resources of each of you;
- The physical and mental capacity of each of you for appropriate gainful employment;
- The disparity in the income earning capacities of each of you;
- Instances of family and/or domestic violence;
- Commitments that are necessary for each of you to support yourself or any other person;
- If one party has greater future needs than the other, the court will generally make an adjustment in their favour to the percentage division nominated at step 3, for example to 55% / 45%.
- To consider whether, in all the circumstances of the case, the proposed order is “just and equitable”.
Identifying the value of the “Pool” of assets
The asset pool is made up of everything that the parties own and in some cases are entitled to. All real estate, businesses, cars, shares, trust assets, jewellery, cash, will form part of the asset pool. Some things are incidental, such as personal effects, but even these things may still have a value and are therefore included.
It does not matter whose name these assets are in, for example who name is on the title of the family home. The Family Law Act cuts across all legal entities and captures everything in which the parties have an interest. Other interests, for example where the “asset” is not in either party’s name but in which each person has a beneficial interest in the asset (also known as constructive trust) may also be included.
It is irrelevant whose name the asset is in, all the assets are scooped up into the property pool and grouped together. However, when an asset, such as the family home, is in only one parties’ name, this means that whilst they shouldn’t dispose or encumber the asset, they are capable of doing so. To prevent this from happening you can place a caveat over a property or register a security interest to stop the other party selling or otherwise interfering with the property.
Contributions of each Party
Both financial and non-financial contributions during the relationship and the property of the relationship are relevant. The law acknowledges that different parties bring different amounts of money and other assets to a relationship. As a general rule, the longer the parties are together, the less relevant the assets that the parties owned prior to the relationship becomes. For couples who have been together for 10 years or more, it is in most cases practically irrelevant.
A usual factor that is considered is who has earned income and the extent to which that income has been applied to looking after the family. However, contributions like looking after the family by raising children and home duties are also just as relevant. On this basis, there is usually not much adjustment either way – with notable exceptions in short term relationships, where there are no children or if one party had substantial assets by comparison when entering into the relationship. All these factors will need to be weighed in the balance.
These are contributions of a financial nature made on or on behalf of a party to the relationship, or a child of the relationship, to the “acquisition, conservation or improvement of any property of the parties” to the relationship.
Financial contributions can include significant assets, saving or superannuation brought into the relationship, or the contributions of salary and superannuation, as well as other earnings generated during the relationship.
These are contributions made by a party to or on behalf of a party to the relationship, or a child of the relationship that may not have a “price-tag”.
These can include home improvement or renovations done by a party in order to improve the value of the matrimonial or investment home.
Homemaker or parenting contributions
These are contributions made by a party to the welfare of the parties to the relationship (including any children) in the capacity of homemaker or parent.
These include parenting duties, cleaning duties and general house maintenance duties. The courts have consistently taken the view that these contributions have equal weight as financial and non-financial contributions.
The court will also consider the contributions made at different stages in the relationship. For example, in a short relationship, the contributions that were made by a party at the beginning of a relationship bear greater weight than they would in a long relationship.
The weight that attaches to initial contributions are known to erode with the effluxion of time. Therefore, a party that contributes at the start of a short relationship, the majority of the assets, has grounds to leave the relationship with most of those assets; but not so if the relationship has endured past the 5-to-7-year mark.
Specific types of contributions may also be relevant to certain assets. For example, physical care provided to an injured partner may be a relevant contribution in determining whether the other party should receive any part of a personal injury compensation payment received.
A gift by third parties, to a party to the relationship, such as parents of one of the parties, may also be classified as a contribution. Common examples of such gifts include monetary gifts, assistance with home purchases or furniture from parents to the parties of the relationship.
Future Needs Adjustments
Adjustments based on future needs will often have a significant impact on how the pool of assets will be divided.
Some factors that the court considers relevant are the parties:
- if there are children, who will be the primary carer of them and to what extent; and
- a person’s ability to generate an income and especially if, taking into account the length of the relationship, one of the parties has sacrificed the opportunity for career advancement or skill development.
These are known as the “future needs factors” or “section s75(2) or 90SF(3) factors”.
These matters must be carefully evaluated. For instance, if one party has an illness, injury or other reason why his or her earning capacity is less likely to be as strong as the other party’s post separation, there will likely be an adjustment in the favour of the person with less opportunity.
The deal must be “Just and Equitable”
While you may feel you are “getting ripped off” the overarching principle when the court determines property settlements, is that they are “just and equitable” having regard to the particular varying circumstances of the particular facts before it.
One party may realistically need more funds immediately, while for another party (such as a party with a strong earning capacity) may appropriately receive assets later. Current assets could, for example, mean proceeds of the sale of a property. An example of a deferred asset of superannuation.
It may be possible to reach agreement with your former spouse as to the value of an asset, liability, financial resource or superannuation interest through the process of disclosure. Where the value of an asset, liability or superannuation cannot be agreed, the Court will require the item to be valued by a registered valuer. If you are unsure in relation to the value of any asset, liability or superannuation, you may instruct us to have it valued by a registered valuer.
You may decide to resolve your matter without conducting any searches or valuations on the basis you are confident that the information you have is accurate. If an agreement is reached, without the extent and accuracy of the property being confirmed by independent searches, or valuations there is a risk that you may be agreeing to less than what you might otherwise be entitled or that there may be some practical difficulty of putting into effect the agreement reached.
Tax and Property Settlement
You should also obtain advice from an accountant in relation to potential consequences that may be triggered in the event of certain outcomes in property or superannuation matters including Income Tax, Capital Gains Tax (‘CGT’), Stamp Duty, Goods and Services Tax, Division 7A Tax and the CGT and GST Withholding Tax Regimes and your ability to claim government benefits (now or in the future).
Your entitlements to pursue financial support (known as “spousal maintenance”) are also governed by the provisions of the Act.
The Act provides that if there is an income disparity between separated parties, then the party with nil or low income may be able to pursue spouse maintenance from the higher income earner.
To be eligible for spouse maintenance, the low-income earner must be unable to support themselves by reason of either:
- Having the care or control of children of the marriage who are under 18 years of age; or
- By reason of age or physical or mental incapacity for appropriate gainful employment; or
- For any other adequate reason (with the adequacy of the reason to be decided by the Court).
There is no formula to apply in determining the amount of spouse maintenance payable. This is a matter for the discretion of the Court but is broadly calculated using a two-step test. In summary, the low-income earner must demonstrate both that:
- They have a shortfall from their income (excluding any government benefits) to meet their reasonable financial needs (step 1); and
- The high-income earner has a capacity to meet that need from their income by way of a surplus of income over their reasonable financial needs (step 2).
The Court also takes into account the “future needs” factors referred to above, which include matters such as the lifestyle the parties enjoyed during their relationship and whether either party is meeting their child support liabilities. The Court will determine in each case what “reasonable financial needs” are based on the circumstances of the case.
Spouse maintenance can either be paid on a periodic (e.g., weekly, monthly) basis or it can be calculated as a lump sum payment.
Alternative Dispute Resolution
The Family Law Rules requires prospective parties to genuinely try to resolve their dispute before starting a proceeding in the Court. This is called taking ‘genuine steps’ to resolve the issues in dispute. Except for those situations listed under the heading ‘What applications are exempt?’, all prospective parties must:
- Read the pre-action procedures
- Make inquiries about, invite the other parties to and where it is safe to do so, participate in dispute resolution services, such as family counselling, negotiation, conciliation or arbitration
- If dispute resolution is unsuccessful, write to the other parties, setting out their claim and exploring options for settlement, and
- Comply, as far as practicable, with the duty of disclosure by exchanging relevant documents.
Anyone who does not comply (unless exempt) risks serious consequences, including costs penalties.
The Court Process
If you are unable to settle or matter, then you may be forced to seek the assistance of the Federal Circuit Court and Family Court of Australia to resolve your matter.
Your case in will be commenced once all attempts to resolve your case by negotiation have failed.
A case in the Federal Circuit Court and Family Court of Australia starts by filing the following documents:
- An Initiating Application. This sets out the orders you want the court to make and has some brief details about you.
- An affidavit. This is the evidence you will rely on to have the court make the orders you want
- A Genuine Steps Certificate, confirming the applicant’s compliance with the pre-action procedures;
- A Financial Statement;
- A Financial Questionnaire;
- A copy of any family violence order affecting the party;
- An Undertaking as to Disclosure in accordance with rule 6.02 of the Family Law Rules;
- If the applicant is aware that the Financial Statement will not fully discharge the duty to make full and frank disclosure, an affidavit providing further particulars;
- If the application seeks interlocutory orders, an affidavit stating the facts relied on in support of the interlocutory orders sought;
- If the application seeks a search order, an affidavit which includes the required evidence; and;
- If the application seeks a freezing order, an affidavit which includes the required evidence.
There is a fee for filing these documents. Currently it is $490. This fee will change each financial year. The current fees for the Federal Circuit Court and Family Court of Australia can be viewed here.
If you have a concession card you may be eligible to apply for a reduced filing fee.
First court day
The court will list your application for a hearing. This date is generally at least 6 weeks away so that there is enough time to serve the documents on the other party and for them to prepare similar documents in response.
On the first day in court your case will be with many others listed before a judge in what is called the duty list. Sometimes the first court date is also called a directions hearing.
Negotiations usually occur outside of court on the first court date. It is possible your matter may settle, in which case, we may seek your matter be adjourned to allow time for the proper documentation to be prepared to capture your agreement. If your matter does not settle, procedural orders (also known as directions) are made to progress your matter including listing your matter for a conciliation conference. Other directions may include orders for disclosure of documents of information, valuations of any assets in dispute and the filing of further documents by either or both parties.
A conciliation conference is a court appointed mediation, an attempt to settle your case before it proceeds further through the court system. It is convened with a registrar (who is a lawyer who works for the court).
Lawyers go to these conferences with their clients. You can expect to spend some time talking about your case with you lawyer or Barrister and the registrar.
Anything said in these conferences cannot be brought up in court and you will not have to make any decisions at this conference until you have taken our advice.
Fee for conciliation conference
There is a fee for the conference. At present it is $415. This fee will change each financial year. The current fees for the Federal Circuit Court and Family Court of Australia can be viewed here.
After the conciliation conference
If an agreement cannot be reached, your matter will usually be listed for a further direction hearing so a hearing date can be set. The court may also make further directions to ensure the case is ready for that further hearing. These directions set down when documents are to be filed (including trial affidavits), what type of documents and whether any further valuations or disclosure is required to be made and when.
It is possible for cases to be listed for multiple directions hearing prior to the final hearing date – it depends on the judge, the extent to which parties have complied with previous orders and the overall readiness of the matter to be listed for a trial.
Final hearing date (trial)
The hearing date for your case is likely to be many months after the last directions. This allows time for the directions the court has made to be complied with, although the main reason for the delay is that your case has to wait in turn for the other cases that were filed before yours.
There is a court fee for each day of hearing. At present this fee is $660. This fee will change each financial year. The current fees for the Federal Circuit Court and Family Court of Australia can be viewed here.
If you have a Concession card or would suffer financial hardship if you had to pay the hearing fee, you may be eligible to have the hearing fee waved.
Overall, you can see there are a number of times when your case is before the court. At all of these court events you can discuss and negotiate settlement, and indeed negotiations can go on right up until the judge makes a decision. Your case can be stopped at any stage if you can reach an agreement.
The final hearing
At final hearing you, your former spouse and any people who file witness affidavits in your matter may be required to be cross-examined (sit in the witness box to answer questions from the opposing side’s Barrister about the content on affidavits filed on behalf of each party.
This is a daunting and stressful experience. If you’re matter is going to proceed to a final hearing it is a good to seek advice on what to say and handle cross-examination.
Settling outside of Court
In the event you have been able to reach an amicable resolution regarding your property settlement, you can elect to have that agreement drawn up as a Binding Financial Agreement, or you can apply to the court for a Consent Order.
We are here to help
It is important to lean on those closest to you to help deal with your feelings about your separation. It is also important to seek professional assistance through this process. Some key services include:
- Family Relationship Centres
- Reconciliation counselling
- Separation counselling or mediation
- Legal Advice from a Family Lawyer
At The Family Lawyer, we appreciate separation is a deeply difficult and confronting time. We take the time to listen and understand your circumstances and provide you with advice regarding your family law issues.