Who gets what will depend on the facts
Australian statistics show that one third of relationships end in separation or divorce. The growing breakdown of relationships caused by divorce or separation has allowed for the distortion and generalisation of what is perceived to be ‘Who Owns What’ in a property settlement. The reason for the misinformation is due to there being no specific rules that indicate which party will retain what in the event of a breakdown in relationship. Each case is fact specific and will be determinable on those facts, each case differing from the one before and after it.
Property Settlement – the Law
Property settlement after separation is governed by the Family Law Act 1975 (Cth) (‘the Act”) and is applicable to married couples’ and De Facto (same sex and heterosexual) relationships. A property settlement may be applied for any time after the breakdown in relationship occurs and need not wait until divorced.
Get started quickly
Because a property settlement order will deal with assets and liabilities that exist at the time the order is made, it is strongly recommended that negotiations for a property settlement begin as soon as is practicable after separation. If you delay, and in some cases, parties have delayed for ten or more years, then the Court will deal with what property exits then, and not when you separated. One of the parties may have accumulated substantial additional assets since separation, and the other party may have run up substantial debts. The property settlement then (in 10 years) would look completely different to a property settlement reached within a reasonable time of separation.
Where a couple gets divorced they must commence property settlement proceedings (i.e. Bring a Court Application) within twelve months of the divorce. Whereas for a married and De Facto couple the application must be bought forth within two years of the breakdown in relationship. Where proceedings are not bought within these limits, a loss of rights may occur due to being outside the time frame. The law takes into consideration the below factors and does not considered the way in which the relationship deteriorated.
This the way a Court will tell you “Who Gets What”
Judges have a wide discretion to make orders for property settlement. In some circumstances, a court will not make any order at all dividing the property, if it appears to the judge that it is just and equitable that each party should keep the property they have without making any adjustment.
However, if the judge decides that an order is necessary to adjust property interests, then orders to divide the property on a just and equitable basis will be different in almost every case, as the circumstances of each particular case that comes before the court are all unique and different.
In applying the legislation over the years, the courts have defined a framework within which it must work to achieve what is a fair and equitable division. This framework involves an approach with four or five steps.
The Steps involved in working out “who Gets What”
The steps to working out a property settlement now may be summarized as:
- What are the legal and equitable interests of the parties in their property;
- Should these interests be altered;
- What are the contributions of each party and what weight should be given to the contributions;
- What is the future of each party and should there be any adjustment for that;
- How is the proposed division to be implemented?
Step 1- What are the legal and equitable interests of the parties in their property
The Court determines what the legal and equitable interests of the parties are in their property.
This will be all assets, liabilities and financial resources in joint names, and in each party’s separate names. Until an order is made, for family law purposes both parties have an interest in each asset in the property regardless of who owns it. The Court will take into account all of the property and financial resources in existence at the time that the order is made. Both parties have an obligation to make full and frank disclosure of all assets and liabilities that exist to each other and to the Court.
The Court then attributes values to each of the parties’ interests. Generally, the court will value the items as at the date that an order is made.
Step 2- Should the parties interests be altered
Once all the property is identified and valued, the Judge will take a step back and look at the length of the relationship, who brought what into the relationship, who owns what now, is there jointly owned property and/or bank accounts or did the parties keep their property separate, and was that their intention or agreement.
If the Judge is of the view that no adjustment in property interests is warranted, then no property settlement order will be made, and each party will keep what they currently own.
However, if relationship circumstances are such that an order is necessary to adjust property interests (and in most cases it will be), the Court proceeds to the next step.
Step 3 – What are the contributions of each party and what weight should be given to the contributions;
The Court determines the contributions that the parties have made to the acquisition, conservation and improvement of the property. The contributions can be direct and indirect, financial and non-financial as well as relating to a homemaker/parent role and otherwise to the welfare of the family unit. The Court will take into account the contributions made:
- at the commencement of the relationship,
- during the relationship, and
- since separation.
Some of the general principles that apply to the assessment of contributions are:
- There is no presumption that contributions are equal or that they were made in “partnership”;
- An evaluation must be made of the actual respective contributions of each party;
- Although in many cases the direct financial contributions of one party will equal the indirect contribution of the other as homemaker and parent, that is not necessarily so in every case;
- Care must be taken to recognise and distinguish a windfall gain;
- Whilst decisions in previous cases where special factors were found to exist may provide some guidance to Judges, they are not prescriptive, except to the extent that they purport to lay down general principles;
- It is ultimately the exercise of the Judge’s own discretion on the particular facts of the case that will regulate the outcome; and
- In the exercise of their discretion, the Trial Judge must be satisfied that the actual orders are just and equitable.
In a short relationship (up to seven years) the Court is more likely to adopt an asset by asset or “piecemeal” approach to the assessment. Relationships beyond that time will be regarded as a mid to long term relationship.
In mid to longer range relationships the Court is more likely to adopt a global assessment of contributions. When taking into account the contributions of the parties the Court will have regard to any period of separation prior to commencement of the relationship.
The assessment of contributions will not be equal in circumstance where:
- One party has made a greater initial contribution than the other; or
- One party has received a significant inheritance (particularly late in the relationship);
- One party has received a significant gift (particularly late in the relationship);
Step 4 – Future Needs
The Court then assesses the future needs of each party, having regard to the various factors set out in the Act. These factors involve looking at and assessing the difference between each of the party’s:
- current income;
- income earning capacity,
- property and resources,
- superannuation entitlements,
- deficits in health,
- closeness to retirement; and
- the need for one party to care for children of the relationship.
Step 5 – How is the proposed division to be implemented
The Court will then give consideration on how the proposed division of property is to be implemented. For example, an order may be structured where the wife gets to the retain the former matrimonial home as the primary care provider for the children, and the husband keeps his superannuation and business assets.
In Property Settlement Court proceedings, the Judge will decide “who gets what”. That judge has very wide discretion and may make a completely different order to the Judge in the next courtroom. You may like the order that is made, or you may detest it.
Before or during your relationship, enter into a binding financial agreement under the Act so that you (and not a Judge) can determine “Who Gets What” should you separate.
If you do separate without a Financial Agreement in place, it is important that you consult a family law solicitor to ascertain what your entitlements are likely to be, and then attempt to reach agreement as to “who gets what”, either personally, through your solicitors or at a mediation. If an agreement can be reached, your agreement can be finalised by consent orders of the Family Court or a Financial Agreement.
If you require assistance or advice with respect to:
- Your likely entitlements upon separation;
- Negotiation of a property settlement
- Preparation of a Financial Agreement,
- Organising a mediation,
- Commencing court proceedings or the preparation of consent orders.