PROPERTY SETTLEMENT
The Act provides a framework for fairly dividing assets and liabilities after separation, ensuring that both parties receive a just and equitable outcome.
What Is a Property Settlement?
Property matters can be resolved by consent through negotiation or mediation. If that’s not successful, the parties can apply to the Federal Circuit and Family Court of Australia for orders dividing their assets, liabilities and financial resources. Reaching an agreement outside of Court is the preferred option, as it saves time, money and emotional stress.
Time Limits
De facto couples must apply within two years of the date they separated.
These time limits are strictly enforced, and only parties who can establish that they will suffer ‘hardship’ if they are not granted leave to file outside of the required time, will be permitted to do so.
It is imperative that you know your ‘limitation date’ (that is, the date you must apply to the Court for property orders), and ensure you seek legal advice well in advance of this date if you and your ex have not been able to reach an agreement about the division of your property pool.
The Four-Step Process
Contrary to popular belief, there is no automatic entitlement to a 50% / 50% division of the property pool once parties have been together for a certain period (10 years seems to be the most common ‘magic’ (but incorrect) number).
There is a four-step process for determining who gets what after the breakdown of a relationship:
- What is the property pool available for division?
- Who contributed what to that pool, before and during the relationship and post-separation?
- What are the ‘future needs’ of the parties, and is one going to ‘struggle’ more than the other moving forward?
- Is the outcome we’ve reached ‘just and equitable’ (or fair and reasonable)?
The Property Pool
The first step involves identifying all of the assets and liabilities of the parties, regardless of whose name they are in. These may include:
- Real estate (homes, investment properties, land);
- Bank accounts, shares, and investments (including crypto);
- Superannuation;
- Businesses and trusts;
- Vehicles, furniture, and personal belongings;
- Debts such as mortgages, motor vehicle loans, personal loans and credit cards.
If the parties are unable to agree on how much something is worth, formal valuations are usually obtained. These come at a (not insignificant) cost, so it’s best to try and reach agreement, if possible.
Assessing Contributions
The Court considers the financial and non-financial contributions made by each party before and during the relationship and after separation.
Financial contributions include income, inheritances, property owned before the start of the relationship and monetary gifts from family members.
Non-financial contributions include renovations, homemaking, parenting and other unpaid.
After considering the parties’ financial and non-financial contributions, the Court arrives at a percentage – sometimes it’s 50% / 50%, sometimes it’s 60% / 40% and sometimes it’s something else. It all depends on the parties’ particular circumstances.
Considering Future Needs
The Court then considers whether one party might struggle more than the other moving forward, due to:
- Age;
- Health;
- Care of children under the age of 18; and/or
- Earning capacity.
If the answer is ‘yes’ (one party will struggle more due to one of the above ‘future needs factors’), the Court will make an adjustment in that party’s favour. It might be 5%, 10% or something entirely different – again, it depends on the circumstances of the case.
Justice and Equity
Formalising The Agreement
If you and your ex-spouse are able to reach agreement in relation to the division of your property pool, there are two ways to formalise this:
- Consent Orders; and
- A Binding Financial Agreement.
Consent Orders are the easier and more cost-effective of the two options.
Consent Orders are a written agreement that is approved by the Court and made into a legally binding and enforceable Order. Before making the Orders, the Court must go through the four-step process, to ensure the outcome is just and equitable. If it is not, the proposed Orders cannot be made.
A Binding Financial Agreement (“BFA”) is a private contract between the parties that sets out how their assets will be divided. BFAs are not approved by the Court, and as such, do not need to be ‘fair’. They do, however, have to meet strict legal requirements in order to be binding and enforceable, as if they were orders of the Court.
We Can’t Reach an Agreement – What Now?
Why Seek Legal Advice?
Property settlements can be complex, especially when there are significant assets or complicated structures involved. Often, there is a power imbalance between the parties, and the one who managed or controlled the finances during the relationship can be at an advantage if the other does not have the benefit of expert legal advice and assistance.
Achieving a favourable outcome in your property settlement can allow you to move on with your life, without undue financial stress. Understanding your rights and obligations, and being able to fight for what’s fair, could mean the difference between financial stability and an uncertain future.
Our lawyers are highly skilled in complex property matters, and will leave no stone unturned in ensuring all assets are disclosed. We want what’s best for you and your family, and financial security is usually a big part of that.
Call our office today to arrange a time to speak with one of our experienced family lawyers about your property matter. It’s free.
