If you have recently separated from a spouse or partner, you are likely thinking about your financial security and how you go about dividing your assets and property.
The Family Law Act 1975 (Cth) (the Act) sets out a process for the division of property following the breakdown of a marriage or de facto relationship.
Who can make a claim?
You can seek a property settlement if:
- You are currently legally married or have been divorced for less than 12 months; or
- You were in a de facto relationship and have been separated for less than two years.
If you have been divorced for more than 12 months or it has been over two years since you separated from your de facto partner, you will require leave (permission) from the Federal Circuit and Family Court of Australia (the Court) to seek a property settlement.
What are my entitlements?
There are five factors that the Court considers in determining a party’s entitlements to a property division (if any).
1. Is it just and equitable (i.e. fair) for there to be a property settlement?
The Court will consider whether the circumstances of the parties’ relationship and their assets justify a division of property. In most cases, where there are joint assets, or the relationship is of long duration, or there is a child of the 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 understand what the parties’ assets, liabilities, superannuation and financial resources are, which can be owned jointly between the parties, individually, by a trust or company. They make up the “property pool” available for division.
It is important to note that the value of the property pool is calculated at the date an agreement is reached between the parties, or if no agreement is reached at the time the matter is determined by the Court, not as at the date of separation.
Assets include real estate, businesses, investments, trusts, shares, cars, bank accounts and any other item of monetary value to the parties.
Liabilities include mortgages, personal loans, lines of credit, credit cards, tax debts and any other debt or liability owing by a party to the relationship. Superannuation includes accumulated funds, self-managed superannuation funds and defined benefit interests.
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. Financial resources are not generally considered in the property pool but are taken into account when determining each party’s entitlements to the property pool.
The value of the property pool can be determined by agreement between the parties, through the process of financial disclosure (where each party is obligated under the Act to exchange financial documents to evidence their respective financial positions) or the formal valuation of assets. Often parties utilise a combination of these methods.
A party’s entitlements to the property pool are determined in the form of a percentage, based on consideration of each parties’ respective contributions to the property pool and future needs, which are discussed below.
3. What contributions have the parties made to the relationship?
The Court looks at the contributions made by each party as at the commencement of the relationship, during the relationship and following separation.
Contributions include:
- Financial contributions – such as assets brought into the relationship, inheritances, gifts or compensation payments.
- Non-financial contributions – such as improvement to a property by way of renovations or working within a family business.
It is important to note that financial contributions by way of income are considered equal to non-financial contributions as homemaker and parent.
4. What are each party’s future needs?
The Court will consider whether the contribution-based entitlements should be adjusted further in favour of one party due to their income earning capacity, age, health or having the care and support of children of the relationship.
Usually, a party with the primary care of children receives an adjustment in their favour for future needs. This is because that person may 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 party does not (for example, a family trust), and an adjustment may be made in the other party’s favour to recognise this.
5. Is the final outcome just and equitable?
The Court will finally look at, after assessing the contributions and future needs of the parties, that the outcome reached is fair in all the circumstances of the case.
Taxation considerations arising from a separation
The way assets are divided can have significant tax implications, particularly when structures like trusts, companies and self-managed superannuation funds are involved. It is important such issues are carefully considered when structuring a property settlement. At Moores we have in house tax and superannuation specialists to assist and ensure all our client’s needs are met.
How Moores can help
We understand that separation is a stressful time. Our practical approach and expertise will help guide you through the process and determine the best property settlement for you.
Contact us for more detailed and tailored help or get started with the Moores Family Law online assistant. The service is confidential and free, you’ll get valuable feedback and a personalised separation plan.