The purpose of this article on separation and property settlement is just to give you a bit of an idea as to how the Courts approach property settlement. Immediately after separation, some people think it is should be a 50-50 split of property and are puzzled when the Court makes an Order that splits the property, say, 70-30 or 80-20 or somewhere different to that. The purpose of this article is to give you an insight into how the Courts approach it and so that you can understand the basis upon which your property settlement might be decided or negotiated upon separation.
The basis of the power of the Court to make Orders about property of the parties and arrange for the transfer of property from one to the other is to be found in section 79 of the Family Law Act.
The four step approach that has evolved through the years since the beginning of the Family Law Act (1975) is as follows:
1. Ascertain the Asset Pool
This means that the Court or the Solicitor acting for you will need to work out exactly what is the Net value of the things that are owned by you, your partner and jointly. This is calculated both as at the time of separation, and at the time of trial or division of property post separation. Sometimes we find people arguing that this item or that item is not a “matrimonial asset” but the Family Court does not distinguish between things that belong to one person or jointly; all possessions are in effect “matrimonial assets” so any argument about things that shouldn’t be included is essentially a waste of time. However, where there is an item that has clearly been one person’s property from before the relationship through until after separation, the Court will consider dealing with that asset in a different way. It remains, however, a matrimonial asset for the purposes of the Act. Also, Superannuation is now property under the Family Law Act and that must be valued. Your solicitor will usually send a Superannuation Information Form to have the superannuation valued as at the date of separation and as at the date of settling property or at the date of your property Court hearing.
2. Assessing the Contributions of the Parties
Section 79(4) of the Act requires the Court to look at the contributions that each party made (both financially and non-financially) before and during the marriage and post separation. There are a plethora of cases that talk about how an initial major cash contribution is to be treated, particularly when that contribution has been made very early in a long marriage. It is not the case that people simply get a reimbursement of money that they put in but, instead, it is counted as a percentage of contributions. So, we look at the contributions at the beginning of the marriage (or cohabitation) and if you each had nothing then your contributions are probably 50%-50% whereas, if one person had a significant cash asset and the other party had nothing, then the contributions might be closer to 90-10 or even 100-0 at the start. This is only at the commencement of the relationship. The Court then looks at contributions throughout the Marriage and not just the financial contributions so a major cash contribution could be offset through the Marriage could be offset by the efforts of the other party. For example, in working side-by-side with the person who had the initial cash contribution to improve that asset and grow their assets or through parenting or support of the party with the cash contribution at the commencement. The longer the Marriage, the more the opportunity for the non-cash-contributing partner to even up (so to speak) and begin to come closer to matching the initial cash contribution. It is difficult, in fact I can not tell you a definite formula that would help you work out how much of that initial contribution would be still regarded in the contributor’s favour because it depends on many factors such as the length of the relationship, the use to which those funds were put or that asset was put and the conduct of the parties during the marriage. I think that this is probably one of the big areas of dispute. Valuations of property can always be attained by valuers and so forth and mostly parties agree on that eventually but contributions and how those contributions should be treated is still an area of rich debate between Lawyers and parties and often requires a judge to make the decision where parties hold firmly to their views.
3. Future Needs
This is found in Section 75(2) of the Act where the Court has to consider that the effect on the parties if they simply divided the property on the basis of contributions in accordance with step 2 above. It may be, for instance, that parties are found to have contributed on the basis of, say, 70% in favour of one party (let’s say the husband) and 30% by the wife. If the wife has other issues that would make such a distribution seem unfair then they are covered in s75(2). Sometimes the Husband has the issues that are covered under s75(2). The factors are things like the comparative ages of the parties, whether or not either of them has the care of a child under the age of 18. The extent to which one or other party supported the other in the obtaining of qualifications that enable them to earn money at a greater rate post-separation than they otherwise would have and whether or not any of them is in receipt of a pension. The Court looks at all of these “future needs” issues and adjusts the percentage to the parties on that basis. For instance, in the example I gave above, if the Wife was disabled and unable to work and had two children in her care, then she could expect an adjustment in her favour. The percentage of the adjustment has to be looked at in real terms so that the wife is properly compensated in this case. Therefore if the property pool was, say, $5,000.000.00 an adjustment of 10% would give her an extra $500,000.00 which might be considered by the Court sufficient to assist her with her future needs. If the asset pool was only $500,000.00 then an extra 10% is only $50,000.00 which may not be considered a sufficient adjustment in real cash terms to assist the wife. In such a case, the adjustment might be more like 20% or more (I hope you can see how tricky property settlement actually is and why you can never really seem to get a straight answer when you ask someone what you can expect to get). All of the steps above are contingent on different factors and the actual circumstances of your particular case.
4. Just and Equitable
In this fourth and final step, the judges look at the effect of the Orders that they are considering making and, essentially, work out proportions of Superannuation (which usually can’t be accessed for some time) and property assets. They consider, for instance, if a person has a capacity to borrow or not. They look at what is needed to provide each person with a reasonable lifestyle post-separation with a distribution of the assets. It would, for instance, be clearly not just nor equitable to give a man who has an earning capacity of only, say, $20,000.00 a year (and therefore no borrowing capacity) superannuation assets only so that he is essentially rendered homeless and in difficult circumstances until his retirement when he would, presumably, have the bonanza of his superannuation. The Court tends to give the person with the greater earning capacity (and therefore the greater borrowing capacity) at least enough to enable them to get started with perhaps the purchase of a new home and so forth but also tends to be to make sure that those with no borrowing capacity get a sufficient share of the current property assets to give themselves a fresh start as well.
I hope this little explanation of the four step process with all of its generalisations is of some assistance in just giving you a rough idea of how property settlement is undertaken in the Family Law Courts.
If you would like a comprehensive assessment of your prospects in property settlement, please consider one of our $143.00 “Know where you stand” appointments, which go for an hour or so at any of our 3 offices or by phone. Call (07) 3832 5999 or email us at enquiries@journeyfamilylawyers.com.au for an appointment or a 10 minute free consultation. No obligation for either type if appointment.
I have been in a defacto relationship for 4 years and we are looking at possibly going separate ways. We have a house together (thanks to my father’s inheritance which contributed towards the downpayment and addt’l additives). In addition, we have an investment propery (unit) in the USA, which is currently being rented out. His income is substantially more than mine. All of my pay was going directly into our mortgage with a small contribution from him. Until last December, unknown to myself, he divided our mortgage payments 50/50 and he continues to cover the rest of the household bills – which he has always done. I’d like to know what sort of position I am in if we do separate. Also, you had mentioned a Consent Order, is this something I should look into as well?
Giina,
Hi.We have sent you a direct email about your problem. Let us know if you did not receive it.
Hi
I;m not sure I have a leg to stand on. My partner has just relocated to Brisbane and brought with with him and dumped me. We met Sep 2008. We coomenced IVF / fertility treatment as my partner in feb2009. we have been together since. we had our own sep houses until early 2010 as he had a messy custody/ access with his. Ex moved to Melbourne together and may 20010.
I have been finacially dependent on him and with the move lost earnings and sold the furniture in the house i owned. Due to fertility treatment and miscarriages i have only worked art time and been the persona taking care of house. Now he attempting to get me off the lease of our new apt we move into on monday and has leftt me stranded in a motel with my persoanl belongings in a motel. he has been very enotionally abusive and i have felt very depressed on and off. Do i have any finacial rights or rights to livingin the apt…
Thanks Natalie
Natalie,
Hi. Lynette has been away so i have taken over the responses.
You may have some financial rights against your Ex. A lot depends on what assets are involved; for example does he have real property/ Also, it depends on whether you were in a domestic relationship for a minimum of two years. The law says that this is the threshold for de facto relationships.
If you give us more details about the dates of your cohabitatin and what assets you and your Ex might have, including superannuation, we might be able to give better advice. It might also be better if yu email me direct on bg@journeyfamilylawyers.com.au
Regards
Bryan
Hi Lynette,
My Partner and I bought a property in December the mortgage is in both our names (50/50) but he has paid the equivalent of 1 repayment to my 8 and has made no contribution to any household bills …… needless to say I am ending the relationship ….. is it possible for him to just sign everything over to me? (it is amicable at the moment)
Kind regards
Ashley
HI Ashley,Well it is a bit of a pickle but at least it is amicable at the moment. Sorry to do the okd lawyers trick of answering a question with a question, but I but I actually need more information to answer you properly. So I am going to make some assumptions and this will help any other readers to.
First I am going to assume that you have been in a de facto relationship for at least 2 years . This means you are eliigibel to have your separation recorded in an agreement ( Binding Financial Agreement) or a Consent Order under the Family Law act. These two documents need amicable co-operation becasue you both sign them to record the agreement. If you haven’t been de facto for at least 2 years, then the Family Law Act doesn’t apply to your property.
Ok, so why would I recommend a Consent Order when you just want to transfer the property to your name? Well, if you have a consent order then you won’t be liable for Stamp Duty on the transfer ( which in\s stamp duty payable by you in the half share of the property you want transferred to your name at it’s unencumbered value) (in Queensland at least. )
Also a Consent order ends your relationship once and for all so that of you win lotto in three months, he cannot have a share. It draws a line under your financial relationship so you can go forward with confidence. If you have a de facto relationship of 2 years or more, and you don’t get Orders of some sort, or a BFA, then the door remains open for him to bring an application for a greater share later on. I hope this helps,
Regards Lyn
Hi,
My husband and I have been separated for close to 18 months. does it make any difference to the outcome of a finacial agreement that we are in the process of sorting out, if we get a divorce before or after the financial agreement is legalized?
kind regards
sharon
Hi Sharon,
Well it doesn’t make any difference at all. The only thing I would caution you about is that if your divorce has been final for 12 months or more, you can’t easily make an application to the Court to get your property settlement sorted out ( if your negotiations fail) For this reason I generally prefer my clients to have finalized their property settlement before they file for divorce. I like them to at least have commenced proceedings.
So, if you want to get your divorce through, make sure you keep an eye on the 1 year deadline and file court documents for property settlement before the year is up.
If you don’t want to do that, I suggest that you do your divorce AFTER you sort out and formalize your property settlement .
Kind regards, Lynette
hi. just wondering where defactos stand when making a property settlement claim on their ex partners large work cover compensation recieved during the relationship and if their claim is veiwed unfavourably by the law? taking into account that there are no children, the claimant didnt work or contribute much to the households expenses and the work cover compensation is for a back injury which will impair the defending parties ability to work in future.
Hi Carrie, that is a tricky question. The short answer is that the compensation money is property in the eyes of the Court, and therefore is required to be taken into account in property settlement . The court would look at what contributions each party made to the marriage, and then what their future needs are. The issue of the injured persons back troubles and their reduced ability to work would ensure they get the largest share of the compensation usually. The other person often gets awarded some of the compensation , however, and it is just treated as any other asset . I hope this helps you,
Regards Lynette
Thank you so much, this is an excellent service.
Kind regards
Ray
Yes Ray, there is a twelve month period after the Divorce becomes final during which any property claim or spousal maintenance claim must be made.
There is a possibility that a person can claim out of this time, but they have to seek the leave of the Court and that leave is rarely given. Your ex would have to establish a number of grounds, non of which it seems she could establish on what you told me.
She has had a property settlement, she has not started proceedings in 2 years, and you have moved on. I don’t think that the Courts would allow her a second bite at the cherry even if she applied to do so.
The court would also find, I think, that it would be unfair to you if they gave her permission to proceed out of time. So on balance, on what you have told me, you have nothing to worry about.
If there is more information we don’t know, and if you are worried about your circumstances , please feel free to call us tomorrow.
Kind regards, Lynette
Hi,
Many thanks for your article. After a 17 year relationship, my husband and I separated 2 years ago. Since the date of separation, he has not contributed to any mutual debts, which I have carried myself because…well, I am not entirely sure why. This has led to great financial hardship for me, and now I am in the process of requesting a settlement he has decided he will not agree to any responsibility for these debts, forcing me into the vicious court cycle at a time that I simply cannot afford it. This article will certainly help me in the process and crossing fingers that soon this can all be put behind me.
Hi Fiona, I am sorry this is happening to you. The pressure must be great. Rest assured that you will feel heaps better when the property settlement is done. Now the issue is how to get to settlement.
Generally after separation, the person who stays in the former matrimonial home is expected to pay the bills associated with the house. They don’t usually get any credit for that unless they pay extra mortgage payments that reduce the debt over and above the usual rate of reduction, or unless they have done renovations that have increased the value of the house.
The Court has always done this on the basis that the person moving out has to pay rent ( presumably) elsewhere.
Now if you have paid other expenses over and above the house rates ,insurance and mortgage, for the benefit of both of you, then you should expect to get a credit for half of those payments since you paid them on his behalf.
I guess you need to balance the cost of recovering those payments from him with the cost (emotional and financial ) of going to Court.
You mention costs of going to Court. It may be that you would benefit from our ” unbundling” plan where you do the work you can do and use Journey as your lawyers when you need them. This gives you a kind of no frills legal service where you do as much of the non legal and easy legal work ( such as filing and collating documents) as you wish to do but still get good lawyers for the tricky stuff. I hope this helps,
Kind regards and good luck,
Lynette
Very grateful to find your web site Lynette and have the opportunity to clarify a situation.
After a 30 year marriage – the last 5 of those being separated , my husband applied for a divorce ( finalizing in Aug 2010 ) We had continued to work our business together but had not had a settlement due to serious financial loss situations that are still before the courts 2 1/2 years after the event that heralded into both our lives great loss and debt factors.
We had always agreed that we would divide our assets 50 / 50 having both contributed to making them into what they were..and as stands now – into what they aren’t. I have heard recently about this ‘one year settlement’ requirement which has been unsettling. Neither of us would have any way to ‘settle’ now . We have already listed and agreed on our furniture division ourselves and I have records of all of our accounts etc. …… with no choice but waiting until there is some court or bank resolution – at which time we would continue with our initial plan to take care of this ourselves.
However I understand that my ex husband now has a relationship – I do not.
‘HOW defacto’ it is I am not sure. He is not forthcoming on it.
Comments in the market place re financial agreements and the fine boundaries of de facto relationships these days has disconcerted me. There have been too many unknowns for us to have formalized our situation although we have prepared mutual wills. What is the deal about the time frame of a year after the divorce ??
From reading your informative web site I see perhaps it is not too tragic unless one of us is wanting more than 50 % each.
But could any of my respective settlement be under any sort of threat from his new relationship ?- either as things stand..or if anything should happen to either of us before being able to complete our financial settlement ?
If we did need to go to court at the end of the day – Would the above criteria be considered as appropriate reason for the delay ?
I do appreciate this opportunity .
I have only recently become aware of these facts and it has been weighing heavily on my heart. Thank you. Lynda
Dear Lynda,
You certainly have a lot of worries, but I think I am right in thinking the main ones you are asking me about are:
can you get property settlement through the courts more than 12 months after divorce and
How does the new defacto relationship impact on your entitlement ?
To answer the first question, you are right in thinking there is a 12 month limit after which you can’t ask for the court to deal with property settlement without special leave granted by the Court. This leave is only rarely given ( if it is contested by your ex). However in your case I think that you would be granted leave to have property settlement proceedings. You appear to have a reasonable excuse for the delay. As you say , though, it is not a problem anyway if you are going 50/50 because you don’t need your property interests ” altered” which is what you need a Court for.
Secondly, the new partner of your ex husband only has a claim on his assets if they have been together as de facto for 2 years( Queensland ) . Her claim comes into play only after their separation. Because he seems to only has an entitlement to half of everything
(on what you have told me) her claim is not going to impact on your share at this stage.
You know Lynda, I wonder if you wouldn’t be better to ring us or come in because I have hardly ever seen a case of agreement that cannot be set down in writing as an order even if your assets are a bit uncertain at the moment. I would recommend doing an agreement that sets out the formula at least while you still agree.
I have answered you tonight Lynda because I don’t want you worrying any longer than necessary . A lot of my advice here is general and may be subject to variation on you giving more full instructions. It is accurate based on what you have told me. Feel free to call us tomorrow 07 38325999 to discuss further if you are still worried or want more information . I hope this helps, kind regards, Lynette
Thank you for your article, it’s informative but the consequences of starting a relationship is financially daunting, to say the least. I’m in my late 50s retired and not short of a quid. Is there any way that I can keep my home, super, and other assets if I wish to enter into a relationship. My wife passed away some time ago, no dependent children etc. etc.
I have been told even if you live separately in your own respective homes there’s an access to your wealth by your ex partner after a few months. How long?.
Hi Mal, yes it is worrying but things aren’t as bad as you have been led to believe.
Actually the length of time you have to live together before your partner has any claim is 2 years.
The difficulty that can arise when the parties argue over when they started as de facto partners. What often happens is that a relationship commences with “sleepovers” while each maintaining your own homes. Sometimes this blurs the commencement date of the de facto relationship and therefore the 2 years before your partner is entitled to anything. Just be clear with future partners. Maybe note the date touching together in a diary that you both sign? It is difficult. Another thing you can do is get a binding financial agreement between you that says that you each keep your own assets in the event that you separate.
Of course, if you have a baby together, the 2 year period does not apply and the entitlement to property settlement anyway.
I hope this helps and that you go on to have a lovely fulfilling relationship .
Kind regards,
Lynette
Thankyou. The artical was imformitive. My de facto partner and I are looking at setting up a financial agreement berfor we purchase a property together and your artical gave me some idea of what the courts consider equitable.
You are welcome, Wendy, although our firm no longer prepares Binding Financial Agreements because in our view, the law is too uncertain at the moment to be sure that the agreement will be binding into the future. Many other firms do offer them though, so if you are sure, they would be able to help you.
Kind regards Lynette
My partner and I are about to get property together and live together and we wondered if the ‘pre-nuptial’ agreements are actually worth getting if the courts go by them or override them.
Hi Tamara,
I think that prenuptial agreements could be a great thing. Unfortunately, though, the law is very uncertain at the moment. My firm has chosen not to do them until the law is clearer.
You will find a firm to do one for you, no doubt, but think carefully before you sign up. Things change in life and what seems sensible now, may not seem so fair in 10 or 15 years.
You may feel, as I do, that the time to work out what is fair is at the time of separation. Prenuptial agreements are really a type of crystal ball gazing in my opinion.