If you have recently separated from a long-term partner or spouse, the question of how the property of your relationship may be divided (or, in other words, who gets what) is likely to be weighing heavily on your mind. A primary concern for people experiencing the breakdown of a long-term relationship is their financial security. It is important to try to figure out a way forward that promotes financial independence for both parties.
The Family Law Act 1975 (the Act) puts in place safeguards to promote the fair division of property following the breakdown of a marriage or de facto relationship in Australia. There is no automatic 50/50 division of property. Every situation is unique and there are a variety of legal issues that arise from the breakdown of a relationship. It is therefore important to get advice from an experienced family lawyer as early as possible. Some of the questions to be answered can be summarised as follows.
The right to seek a property settlement will first be answered if:
If it has been more than 12 months since your divorce was finalised, or over two (2) years since you separated from your de facto partner, you will require leave (permission) from the Court to seek a property settlement. Coulter Legal can give you tailored advice about your rights.
There are five (5) factors that the Federal Circuit and Family Court of Australia (the Court) considers in determining a party’s entitlements to a property division (if any):
1. Is it just and equitable for there to be a property division?
The Court will consider whether the circumstances of the relationship and the assets justify a division of property. In most cases, where are children of the relationship and joint finances, a lengthy relationship, a division of property is likely to be just and equitable (i.e fair).
2. What property is there to divide?
If it is just and equitable to divide property, the Court needs to know what are the parties’ assets, liabilities, superannuation and financial resources. This is called the “asset pool”.
A common misconception is that the value of the asset pool will stay set at the date of separation. This is not correct. The value of the asset pool will be calculated as at the date agreement is reached between you and your former partner or spouse or if there is no agreement, the value at the time the matter is decided by a Judge. This is one of the many reasons why it is important to seek legal advice to resolve your property settlement early.
Assets include real estate, businesses, investments, shares, motor vehicles, bank accounts and any other item of value of both parties. It may be the assets are held in one party’s name or in the name of another third party but really belongs or is controlled by a party to the relationship.
Liabilities include home loans, personal loans, lines of credit, credit cards, tax debt and any other debt or liability owing by a party to the relationship.
Superannuation includes self-managed superannuation funds, defined benefit interest or accumulation funds.
Financial resources are an actual or potential right to assets which may or may not have a quantifiable value or is capable of being divided. This may include rights in a family trust or an inheritance which is to be received in the near future (in limited situations). Financial resources are not generally considered in the asset pool but are taken into account when determining each party’s entitlements to the asset pool.
The asset pool is determined either by agreement between the parties or through a process of financial disclosure (in which each person is obligated to exchange financial documents to evidence their financial position) and valuations of assets (done by a Single Expert jointly engaged by both parties).
3. What contributions have the parties made to the relationship and asset pool?
The Court will look at the contributions made by each party to the relationship and to the asset pool at the start of the relationship, during the relationship and following separation.
Initial contributions can be a home that one party owned before the relationship.
Financial contributions by way of income are considered equal to non-financial contributions as homemaker and parent.
The Court will consider each parties contributions in the form of a percentage.
4. What are each party’s future needs?
The Court will see if the contribution-based entitlements should be adjusted further in favour of one party a result of a party’s age, income earning capacity, health or caregiving responsibilities.
Generally speaking, a parent with the primary care of the children of the relationship is likely to receive an adjustment in their favour. This is because that person will be unable to work in paid employment during the time in which the children are in their care or their income earning capacity is limited due to being out of the workforce for a period of time.
The Court will also consider whether one party has access to a financial resource to which the other person does not (for example, a family trust or business), and an adjustment may be made in the other person’s favour to address this.
5. Is the final outcome just and equitable?
The Court will finally check, after doing the above assessment of the matter, that the outcome is fair in all of the circumstances of the case.
The Court also has the power to deal with the dissipation of assets either before or after they occur. It is vital to get legal advice early if you think the other party might divest themselves of their assets to avoid a property settlement under the Act.
There are also tax considerations that need to be considered in a property settlement like Capital Gains Tax, Stamp Duty, Income Tax and triggered tax consequences within a company.
It is important to have your property settlement documented in a legally enforceable way to avoid any future “second bite of the cherry” and sever all financial ties following the breakdown of a relationship.
You can find information about how to reach a property settlement and out-of-court options for formalising your property settlement either through Consent Orders or a Financial Agreement.
If you have recently separated or are going through a divorce, contact the Family & Relationships Law team at Coulter Legal for a no cost 30 minute consultation to discuss your property settlement.