- Family Law Property Settlement Simplified
What does the Court consider when dividing the matrimonial pool of assets in a breakdown of a marriage or de facto relationship?
The Court will generally consider the 4 step process when determining the division of the asset pool:
1. Determining the Pool of Assets
2. Contributions
3. Future Needs
4. Just and Equitable Factor
Step 1 - Determining the Pool of Assets
The first step addresses the question of : What is the pool of assets the parties fighting over?
When determining the matrimonial pool of assets, the Court will consider the parties' assets, superannuation and liabilities in their joint and sole names:
Real estate values and mortgage balances (and offset account balances)
Bank account balances
Share portfolios balances
Motor vehicle details and estimate value (and if financed)
Value of businesses
Any other assets and their estimate value
Superannuation balances
Credit card account balances
Any other loan account balances
Disclosure Obligations
The above can be resolved through the parties' compliance with their financial disclosure obligations. The parties should attend to exchanging their financial documents. This obligation is ongoing which means that as the matter progresses, the parties should provide updating financial disclosure documents. A good practice is to provide documents every 6 months. The list of financial documents to provide to the other party include the following:
Your 3 most recent taxation returns and notices of assessments
Your 3 most recent pay slips
Your employment contract
Your bank account statements for the past 12 months including but not limited to savings accounts, everyday accounts, off set accounts
Your bank account statements for any loans held on properties for the past 12 months
If you own or control a business, your business activity statements for the past 12 months (if any)
Your most recent superannuation member statement
If you have an interest in a self-managed superannuation fund, a copy of that trust deed, and financial statements and tax returns for the past 3 years
If you have an interest in a partnership, a copy of that partnership deed and financial statements and tax returns for the past 3 years
If you have an interest in a publicly listed company, copies of the share statements relating to each of those interests for the past 12 months
If you have an interest in a company which is not publicly listed, a copy of the company’s constitution, and a copy of the financial statements and tax returns for that company for the past 3 financial years
If you have an interest in a trust by way of beneficiary entitlement or are a trustee or appointor, a copy of the trust deed and copies of the financial statements and tax returns for that trust for the past 12 months
If you have disposed of property in the 12 months preceding separation or since separation, documents evidencing that disposal
Market appraisal of the value of any item of property in which a party has an interest including but not limited to real estate properties and jewellery (unless the parties have agreed on the value)
See Rule 13.04 of the Family Law Rules 2004 for the parties obligation to provide full and frank financial disclosure. The link is: http://www7.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_reg/flr2004163/s13.04.html
Step 2 - Contributions
The second step addresses the parties' contributions before, during and after the relationship. In particular, the Courts have broken down the assessment of the parties' contributions through the following categories:
Financial Contributions:
The parties' initial financial positions at the commencement of cohabitation or marriage (whichever date is earliest);
The parties' income and distribution of that income towards meeting mortgage repayments or other expenses
Gifts of money or assets from third parties such as relatives
Non-Financial Contributions
Assistance from third parties to indirectly increase the value of assets such as renovating the parties' property without charging labour fees
Interest free loans from third parties
Provision of rent free accommodation
Subsidising the parties' expenses
Home Making and Parenting Contributions
The parties' division of home duties and chores
Primary care of a child or children
For details, read the relevant legislation:
s79(4) Family Law Act 1975 (Cth) for parties in a marriage
s90SM(4) Family Law Act 1975 (Cth) for parties in a de facto relationship
The ambit of dispute in most family law property matters are found in Step 2 as they cannot agree on the percentage credited to a party for their contribution.
Step 3 - Future Needs
The third step addresses whether an adjustment should be made for the parties' future needs. The most common issues addressed when the Court assesses whether an adjustment should be made in favour of one party against the other is as follows:
Age of the parties and their anticipated duration of working life
Whether the parties are experiencing health issues
Income, property and financial resources
Earning capacity and prospective income if they are currently not working
Whether a party needs to undertake study to enter into the workforce
Care of a child or children and protecting their continued role as carer of the child or children
Ability to support themselves and their child/ren or other person
Receipt of pension, allowance or benefit from the government
Receipt of pension or payments from a superannuation fund or scheme
Standard of living
Financial resources of a party living with another person
For details of the full list of items considered by the Court when assessing an adjustment, please read the relevant legislation:
s75(2) Family Law Act 1975 (Cth) for parties in a marriage
s90SF Family Law Act 1975 (Cth) for parties in a de facto relationship
Step 4 - Just and Equitable Factor
The Courts looks at whether it is just and equitable to make an alteration of the property interests. It gives the Court the opportunity to look at the case in its entirety and to assess anything special about the case that had not been already considered.
Court Approaches
The Courts have 2 approaches when assessing the division of the matrimonial pool of assets being the:
Global Approach; or
Asset by Asset Approach.
The general rule of thumb is that the longer the relationship, the closer the division of the matrimonial pool of assets comes to a 50-50 split. This is more common in long relationships. For example a 20 year relationship where the married couple had no assets, liabilities or superannuation when they started the relationship, and during the relationship the parties accumulated wealth and raised children and at the end of the relationship, the parties no longer have a long working life.
The shorter the length of the relationship, the Courts are likely to take the asset by asset approach. This is when the Court analyses each item on the Balance Sheet. This approach can also be argued for significant initial contributions or monetary gifts from one party that have not been sourced or maintained during the relationship.
Formalising A Property Settlement
When the parties have reached an agreement, the parties can enter into an Application for Consent Orders and Consent Orders or a Financial Agreement in relation to their property settlement.
You should speak with a lawyer about the best way to formalise your property settlement.
Contact us for a free 20 minute initial consultation.
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