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How Do We Get to a Just and Equitable Division of Assets in a Family Law Property Settlement?

How Do We Get to a Just and Equitable Division of Assets in a Family Law Property Settlement?

The break-up of a marriage or de facto relationship is naturally one of the most stressful times in a person’s life. Apart from dealing with the emotional toll of the split and, in many cases, its effect on children from the relationship, the process of disentangling two lives in terms of property and assets can be a difficult and gruelling process.

Under Australia’s Family Law Act 1975, property settlements at the end of a relationship to allow both parties to move on with their lives have the aim of being ‘just and equitable’. This means that the Federal Circuit and Family Court of Australia (FCFCOA) will only alter the property rights of the parties to the dispute if it is just and equitable to make an order, and that it goes no further than ‘the justice of the matter demands’.

In the 2012 High Court case of Stanford v Stanford, the Court made it clear that whether it is just and equitable to make an order altering property interests should be considered at the outset, before undertaking a process to work out how the assets will be divided between the ex-couple. There must be a ‘principled reason for interfering with the existing legal and equitable interests of the parties to the Marriage’, the judgement stated. This initial question usually involves identifying the interests of the parties as currently held.

Whether it is just and equitable to make an order is usually easily satisfied by the fact both parties seek a property settlement as a result of the end of the relationship. The decision is more difficult where one party to the former relationship seeks no order be made.

What is the process to work out a fair division of assets?

Where a former couple cannot come to their own agreement about how property and assets from the relationship are to be divided, through mediation or some other dispute resolution procedure, the Court undertakes a number of now well-established steps before deciding whether an order should be made:

Identify the value of the property, liabilities and financial resources of the parties at the date of the hearing: Whether obtained by each party seeking independent advice from their accountant or financial advisor, or achieved through an independent expert valuing the assets of either or both parties, the first stage of the property settlement process requires determining the net value of assets, debts and any other financial interests – sometimes expressed as the ‘asset pool’ – to be divided. It’s important both parties make ‘full and frank’ financial disclosure to each other of all assets relevant to the relationship at this stage.

Work out the contributions to the relationship by each party:
Next the Court considers the contributions each party brought to the relationship, as well as the contributions made during the relationship including financial, non-financial, parental and domestic contributions. Financial contributions might include property brought into the relationship, income, shares, inheritances and gifts. Non-financial contributions could include homemaking and home improvement, for example. In some cases, contributions after separation will also be considered.

In cases of longer relationships (usually 12 years or more), contributions will generally be considered to have equal value unless there is significant evidence suggesting this is not the case, or where one party received a ‘special’ contribution such as an inheritance during the relationship.

Superannuation is also considered to be property. Depending on the value of the fund, it will be include in the asset pool to be divided, or in some cases treated as a separate asset.

Current and future needs of each party: This step is important in working out whether making a property settlement order will be just and equitable, taking into account the care of children from the relationship, the future earning capacity of each party and the age and current health of each partner.

In considering the care of children by one party to the former relationship, the ages of the children; the amount of supervision they require; the effect of the children’s care on the parent’s ability to work; and the extent to which one party pays child support are some of the relevant factors.

In assessing future earning capacity the Court will have regard to whether one party’s earning capacity was affected by the relationship; the party’s capacity to get a job and what they are likely to be paid; whether a party needs training or other qualifications in order to secure a job; and the likelihood of a party receiving or retaining an income producing asset as part of the property settlement, among other factors.

Making a property settlement order

Once the Court has made an assessment of the factors outlined above, it determines whether the proposed percentage distribution of property would be just and equitable to both parties given all the circumstances of the case.

All of the factors discussed are discretionary, meaning the Court does not favour one factor over another in making a decision about what is a fair and equitable settlement to both parties. Similarly, there is no presumption of a 50:50 split in a property settlement, or that the party who was the ‘breadwinner’ in the relationship will be entitled to a greater share of the asset pool. In this respect the decision to make an order reflects a degree of moral duty and responsibility between the parties, as well as the practical considerations of contributions and needs.

Speak with our family law experts today

The process to reach a just and equitable property settlement after a relationship break-up is detailed and time-consuming. Seeking the advice and assistance of our family lawyers Bowen at PD Law to navigate the steps taken by the Court, or to reach an out-of-court agreement with your former spouse or de facto, is a wise and sensible course of action to reduce your stress and inconvenience. We will provide clear, concise and compassionate advice with a view to achieving a just and equitable settlement.