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.
It’s splitting all your things after you go your own ways
Property DEFINEd
- Real property, such as the family home;
- Superannuation;
- Business interests;
- Trust interests;
- Jewellery, including wedding and engagement rings;
- Chattels, such as an above ground spa;
- Vehicles;
- Assets acquired through inheritance;
- Money; and
- The family pets.
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Liabilities will also be divided between the parties: - Debts, like credit cards;
- Loans, such as a joint mortgage;
- Tax, such has Capital gains and
- Stamp duty obligations.
How is Division Decided by the court
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.
The Five Steps 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”.
contributions of
each party
The law acknowledges that different parties bring different amounts of money and other assets to a relationship.
Generally the longer the parties are together, the less relevant the assets owned prior to the relationship becomes. For couples who have been together for over 10 years, it is 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.
Financial Contributions
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.
Non-Financial Contributions
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.
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.
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.
The courts have consistently taken the view that these contributions have equal weight as financial and non-financial contributions.
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.
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.
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.
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.
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).
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.
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You have Questions. We have Answers.
Frequently asked questions
Should I put off property settlement?
The law considers the asset pool at the time of any trial, not at the date of separation.
There is significant risk associated with delaying a property settlement as the values of assets, liabilities and or superannuation, as well as the parties’ financial circumstances, may change between the date of separation and when negotiations begin and or the matter is brought before the court.
This means that any windfalls or inheritances accumulated may be included as part of the asset pool for division.
If we dont agree about property settlement?
Parties must engage in pre-action procedures, which can include family dispute resolution and the exchange of all financial documents. You should engage in negotiation to try and settle your property division or, at the least, narrow the issues. If this has been unsuccessful, you can apply to the court for property and financial orders.
If we do agree about property settlement?
If all are in agreement, you can finalise your property division and financial orders with a Binding Financial Agreement or by applying for Consent Orders from the court. This is the most cost effective approach to settling your property division.
Is Superannuation included in property settlement?
Superannuation can be divided as part of a property settlement or as a standalone agreement under a superannuation agreement or by a court order. In 2002 the Australian government introduced superannuation splitting laws which enable superannuation to be split and dealt with as part of a family law property settlement.
Court orders can be obtained by consent of both parties upon their separation or at the end of litigation. Under the Family Law Act, any property settlement aims to provide a just and equitable outcome for the parties involved.
When deciding if, and how, superannuation should be split, the court will be guided by whether it is just and equitable to do so.
Divorce VS property settlement, whats the difference?
Property settlement is the formal division of assets following the end of a relationship. Discussions regarding the division of assets can occur as soon as a couple separates.
A divorce is the legal termination of the marriage and will allow the parties to remarry.
You must wait 12 months from the date of separation before you can apply for a divorce.
You can formalise your property settlement without applying for a divorce.
Who pays the mortgage after separation?
The first and most important thing to remember is that if the mortgage is in ‘joint names’, then both parties are legally responsible for the payment of the mortgage.
If the mortgage repayments are not made, and the mortgage is defaulted on, then the bank will want to take possession of the property and sell it. This will also affect your credit rating.
