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Mathews Family Law have created many detailed articles answering the most common questions people have in relation to their rights and Australian Family Law.


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Maintenance – The Basics

Maintenance – The Basics

Maintenance is available to those who were married, and also those who were part of a de facto couple. While there is no automatic right to maintenance, the court may choose to issue an order for maintenance if the facts indicate that it is proper. When faced with whether to issue an order for maintenance, the court will consider a myriad of factors, such as the ability of one party to pay, the standard of living of the spouses, the income capacity of the receiving spouse and whether it has been negatively impacted by the marriage, any child support being paid, and the health of the spouses.

When an order for maintenance is issued, it is intended to be temporary. The ultimate objective of maintenance is to help the financially disadvantaged party to reach a point of self-support. Most maintenance orders do not last more than three or four years, as the court ultimately wants all parties to reach a point of financial independence so the relationship can be finalised.

If certain specific circumstances have arisen since the order has been issued, the order may be varied. The court may only take this action, however, if one of the circumstances proscribed in the Family Law Act has occurred. An example of when an order for maintenance may be varied is where the cost of living has changed to justify a variation.

Orders for maintenance will terminate upon the occurrence of an event, for instance if either party dies or remarries. However, termination of an order does not affect your right to collect an arrearage.

Maintenance – The Details

Maintenance – The Details

When there is a disparity between parties’ income and earning capacity, the Family Law Act allows this disparity to be remedied through the something called “maintenance.” Typically, maintenance is only available for a short-term period – about three to four years. The idea behind only allowing a party to receive maintenance for a relatively brief period of time is that the maintenance payments are intended to compensate the recipient while that person takes steps to enter the workforce or re-establish him or herself.

Much like the approach to property division, the objective of maintenance is to work towards a “clean-break” between the parties. Maintenance is intended to be a temporary crutch to help the financially disadvantaged party get back on their feet and subsequently be able to independently support themselves.

An action for maintenance can be brought before divorce, after divorce (but within 12 months), even if the parties’ marriage is void, and after the breakdown of a de facto relationship. The two major limitations with regard to orders for maintenance are that you must get leave or court (special permission) to seek maintenance after 12 months of the divorce being final, and you cannot seek maintenance if there is a binding financial agreement that addresses maintenance.

Who Is Entitled to Maintenance?

The Family Law Act provides for three circumstances that warrant an order for maintenance for formerly married couples. Said circumstances are:

(a) by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;

(b) by reason of age or physical or mental incapacity for appropriate gainful employment; or

(c)  for any adequate reason,

Additionally, the court must consider relevant factors in making this determination. Those factors include: the ability of one party to pay, the standard of living of the spouses, the income capacity of the receiving spouse and whether it has been negatively impacted by the marriage, any child support being paid, and the health of the spouses.

There is a similar provision regarding maintenance for de facto couples. While there is no automatic right to maintenance, one party may be liable to pay maintenance towards the other party to the extent that the party can reasonably do so and only in circumstances where the other party is unable to support himself or herself adequately. The test used by the courts is not whether the applicant is in need of maintenance, but rather if that person is in a position to support themselves with their own resources.

Types of Maintenance Orders

An order awarding maintenance can be made several ways; by consent, after a contested hearing or to meet urgent needs. The Family Law Act gives courts the authority to issue an urgent maintenance order without a detailed enquiry, which would normally be required upon application for maintenance. These cases are rare, and only exist where one party is in immediate need of financial assistance. These orders differ from regular maintenance orders and only last for a limited duration.

Another type of maintenance order is referred to as a secured maintenance order. This occurs where the court makes a requirement that a maintenance order be secured by some type of collateral. These orders minimize the risk of default, and also make the enforcement of a maintenance order easier.

Maintenance can be in the form of periodic payments, a lump sum, or use of the car or home. The modern trend is for maintenance to be issued in a lump sum amount. This is preferable because the objective of awarding maintenance is to provide the financially disadvantaged party temporary help to reach a level of self-support. Often, a lump sum works towards this objective better than periodic payments.

Varying and Terminating Maintenance Orders

Maintenance orders differ from other family law orders in that they may only be varied on limited grounds. In order to have the amount of a maintenance order increased or decreased, the following circumstances must have occurred since the order was made or last varied:

  • the circumstances of a person who was benefiting from the order have changed
  • the circumstances of the person liable to pay have changed
  • the cost of living has changed to justify a variation
  • the amount is not proper or adequate and the original order was made by consent
  • material facts were withheld from the court or deemed false, and those facts affected the order issued by the court

While the court enjoys slightly more discretion when varying other orders in family law proceedings, it is clear that they may only vary maintenance orders for the reasons laid out above.

Once a maintenance order requiring the payment of a lump sum has been executed, and the money paid, that order can no longer be varied. Such orders are deemed to have completed and at that point cannot be altered.

An order for maintenance will terminate upon the happening of various events. It will terminate at a time prescribed in the order, when the order is discharged, when one of the parties dies, or when a party remarries. However, it is important to keep in mind that once a maintenance order terminates, your rights to collect arrears do not also terminate. If you are owed maintenance, you may still collect it despite the fact that the order is no longer in affect.

 

Superannuation in Property Division

When a couple separates or divorces,  or a de facto relationship[i] ends, property must be divided.  Property includes all of the assets – houses, cars, jewelry, furniture – and all of the liabilities, like loans and mortgages.  Superannuation – the money individuals set aside to have when they retire – are now also included in those assets that need to be divided fairly between a couple, whether married, de facto heterosexual or de facto same sex.  In the past, superannuation was considered a financial resource, similar to salary or other income.  Today, however, most couples weigh superannuation funds as if they are marital assets or property.

Part VIIIB of the Family Law Act, 1975 (FLA) covers issues dealing with superannuation and families.  The law requires that the superannuation benefits due to one spouse or de facto partner must be divided with the other spouse or partner.  But there are several difficulties with dividing superannuation.  Firstly, if a couple divorces before retirement, the superannuation funds are not yet available.  So while a couple may divide up their property at the age of 45, they may not see funds from superannuation for another 20 or 30 years.  Other problems…..

The law recognizes these problems and offers three ways a divorcing couple can divide superannuation interests.

  1. “Split”.  The first method is to split the interest into two accounts or benefits.  This can be done either by a payment split, when the superannuation becomes due (say, at retirement) or through an interest split, which means each partner receives a superannuation interest.  With an interest split, the partner receiving the new benefit can keep the money in the original account until it comes due, or open an entirely new account.  Nobody receives an actual cash payment – the money remains in a superannuation fund.  Tax issues must be calculated before the payment or interest is split.
  2. “Flag”.  The second approach to dividing superannuation is to flag the benefit for a later date.  In this scenario, the couple marks the benefit and the trustee of the superannuation fund is not allowed to touch it until the “flag” is lifted, either by agreement of the parties or with a court order.  The couple can then decide what happens to the fund only later, after the person who owns the superannuation account retires.
  3. Leave it alone.  In this case, couples consider the superannuation a financial resource.  When dividing up their assets, superannuation is only included in the calculation as a source of income, not as an asset.

Splitting the Superannuation Now

Typically, divorcing couples split their superannuation.  Most couples choose this approach because it enables them to know exactly how much money they are receiving and allows them to make a clean break, without having to return to financial issues ten, twenty or thirty years later.

There are several steps needed to split the superannuation:

Step 1:  Request information from the partner’s superannuation fund.   There are two forms that a spouse must submit to the trustee of the superannuation fund: (1) Form 6 Declaration, which proves to the trustee that you are entitled to see the information and; (2) the Superannuation Information Request Form.   These forms can be obtained online.

You must be “eligible” to receive the information from the fund.  An eligible person is:

(1) The member of the fund or;

(2)The spouse of the member of the fund or;

(3)If (1) or (2) died, the deceased person’s legal representative or;

(4)Someone who plans to enter into a superannuation agreement with the member

Step 2: Evaluating information from the superannuation fund.   The law requires the fund to provide information to the member of the fund and his or her spouse.   The fund may provide information regarding the value of the superannuation or information that helps the person requesting information determine the value of the fund.   The trustee should also notify the requester whether or not the fund may be split.  Once this information is obtained, the numbers must be calculated using specific formulas, depending on the type of fund.   An expert in family law or accounting can help determine the correct formula to use in order to obtain the correct amount of interest each party is entitled to from the superannuation.

Step 3:  Turn to the courts for an order.    Couples may sign their own splitting agreement and take it directly to the trustee of the superannuation fund.  Alternatively, couples can turn to the courts with their own financial agreement already signed.  Finally, if a couple can’t agree, they may obtain a court order.

(1) If both sides agree about the value of the fund and it’s division, they can submit an Application for Consent Orders, which includes their agreement regarding superannuation.   This agreement is binding only if both parties signed it AND both received independent legal advice.  This is the case regarding all financial agreements between couples divorcing.

De facto couples terminating their relationship may also submit a financial agreement regarding superannuation, but only if they were residents of New South Wales, Victoria, Queensland, South Australia, Tasmania, the Australian Capital Territory, the Northern Territory or Norfolk Island when the agreement was made.

(2)If the parties cannot come to their own agreement, they may turn to the court for Orders.

In either case, the trustee of the fund must be notified that the court is being asked to give orders.  This is to ensure that the request being made complies with the fund’s rules.  Also, the trustee is entitled to attend the court hearing and oppose the orders.

Step 4: Send a copy of the agreement or court order to the superfund trustee.  Once the court gives orders, the superannuation fund must be sent a sealed copy of the decision.

Step 5: Split the superannuation benefit.  Generally, the superannuation benefit will be split into two funds, one for each partner.   There may be administrative costs for splitting the fund.

 

[i]  Laws on the splitting of superannuation do not apply to de facto couples from Western Australia.

Premarital and Postmarital Property

When a couple divorces (or de facto or same sex couples terminate their relationship), one of the major decisions to make is “who gets what”.  A pre-nuptial agreement may help make this division easier.  If a couple can decide between them and come up with their own agreement, long court battles can be avoided.  If not, the courts have their own way of dealing with property division.  In Australia, the courts place all property into one pool and then divide it “equitably” or fairly.  Everything is included and considered joint property by the courts.

The law governing property division(link to “Property Division FAQs”) between spouses or de facto couples is Part VIII of the Family Law Act, 1975 (FLA).  The law provides guidelines for the courts to use when dividing property.  There are a number of factors the court will consider and which couples should know about.  Below is a list of some considerations.

Think about the children

Before even entering into the fight, divorcing couples should consider their children when dividing up property.   It might be more “fair” to sell the marital home, but parents (if they can afford to) should also consider the impact of this change on the children.   If parents are going to share parenting time, they should think about what children will need in each home and also divide accordingly.  If one parent is moving to a smaller home, he or she might not have space for so much furniture, so why demand it just for the sake of being fair.  Both parents should consider the physical and emotional needs of their children, not just what they themselves believe they are entitled to receive. 

Depreciation of ownership rights

Over time, the contribution of the person who brought the property decreases and the contribution of the other partner increases.  For example, one person may have purchased the house prior to the marriage, but the other partner paid most of the mortgage on it for the next 20 years.  The investment in the house may be equal by the time the couple splits up and the court will consider this relevant in making an equitable distribution.

The value of the property when it was acquired.

The courts will consider the value of the property when it was brought into the marriage as well as the length of the marriage.  There is a difference between a house that was worth $100,000 and one worth $2 million.  If a couple was married for only a short period and during that time the marital home tripled in value, how much is the spouse who purchased it prior to the marriage entitled to?  How much is the other spouse, who paid next to nothing in terms of mortgage and maintenance, entitled to?

Non-financial contribution

The courts in Australia today recognize that in many marriages today, one partner may earn a high salary while the other contributes to the marriage in a non-financial capacity.  This role has a value that also needs to be measured for property purposes.  Many couples decide that one partner will stay home to care for the house and children.  This enables the other partner to obtain an education, gain professional experience and earn a higher wage.  The stay-at-home parent is entitled to financial compensation for his or her job at home and for allowing the other spouse professional development.

The parent who stays at home makes other large non-financial contributions to the home.  By being at home, the family saves thousands of dollars on child care and possibly cleaners and cooks.  Finally, the at-home spouse may undertake do-it-yourself jobs, like painting, also worth a good deal of money to the family, but without any actual monetary compensation.  Imagine a spouse who repaints the inside of the house.  Not only has the family saved on the expense of paying an outside contractor but the value of the home has also increased.

Use and maintenance of the property

The court will consider not only the worth of the couple’s property but also how it is used.   In one family, for example, the father stays home to care for the children.  He is responsible for all household work – cooking, cleaning, gardening, paying bills.   The mother, in turn, works long hours to provide a good income and financial stability.  No doubt the mother “earned” her share of the house, but so did the father.  The court might ask who actually needs the home more.  In this case, the court may consider equitable distribution to mean that the father keeps the house and the mother receives other property.

Future needs 

Section 75(2) of the FLA lays out the factors a court uses to determine the “future needs” of each spouse.  The court considers age, health, professional training and ability and property and financial resources, among other factors.  Based on this analysis, the court may decide that a particular spouse is entitled to more of the marital property, to compensate for that person’s weaker ability to earn a living.

De Facto and Same-Sex Couples and Property

De Facto and Same-Sex Couples and Property

Same-sex couples, like all de facto couples, may turn to the courts for orders on division of property, superannuation and maintenance if the relationship breaks down.  The rules applying to de facto couples are somewhat different, though, than those applying to legally married couples.

Can all De Facto couples obtain these orders?

No! Couples can receive these orders from the court only if the court is satisfied that the couple meets one of the following criteria:

  • The relationship was at least two years long
  • The couple has a child together
  • One person made significant financial or nonfinancial contributions to the marital property or as a homemaker or as a parent and would be disadvantaged if the order was not granted
  • The relationship was registered (in those states and territories where such registration is possible)

 

Does it matter where you live?

Yes! The laws apply to de facto couples who have a geographical connection with New South Wales, Victoria, Queensland, South Australia, Tasmania, the Australian Capital Territory, the Northern Territory, Norfolk Island, Christmas Island or the Cocos (Keeling) Islands.   Geographical connection means that at the time the relationship broke down, the couple lived in one of those states or territories.

A court may still give orders on property division, superannuation and maintenance if:

(1) The couple lived in one of the above States or Territories during at least one third of their de facto relationship or;

(2)The person applying to court for the order made substantial financial or nonfinancial contribution in one of the above States or Territories or;

(3)One of the partners ordinarily lives in one of the above States or Territories at the time the application to court is made.

 

Does it matter when the relationship broke down?

Yes! The Commonwealth laws allowing de facto couples to divide property came into affect only on August 1, 2009 (and in South Australia only on July 1, 2010).  Therefore, in those states and territories where they apply, it’s only for couples whose relationship broke down after those dates.  If a relationship broke down before August 1, 2009 (or July 1, 2010 in South Australia), the laws of the particular State or Territory apply, unless both parties request in writing that the new laws apply.

One or both parties must apply for these orders within 2 years of the breakdown of the de facto relationship.

 

Can a couple make an arrangement on their own?

Definitely!  De facto couples can make their own arrangements regarding their property, including debts, assets, superannuation and spousal maintenance.  Financial agreements are covered under Part VIIIA of the Family Law Act of 1975.  These agreements may refer to:

(1) Property and financial resources and how they will be dealt with if the marriage breaks down or;

(2)The maintenance (financial support) of either of the spouses during and/or after the marriage or;

(3)Any other matter related to (1) or (2) above

This agreement can be made at any time during the relationship or after it breaks down (but you must apply for the orders within two years of the breakdown – see above)  and it can be formalised by the court by applying for a consent order.  Once a consent order is made, it has the validity and enforceability of a court order issued by a judge.  Both parties must apply for a consent court order for a property agreement by completing the Application for Consent Orders.  You do not need to go to court to apply for consent orders.

This financial agreement is only binding if: (1) both partners signed it AND; (2) both partners received independent legal advice about the agreement.   Partners are not allowed to receive advice from the same lawyer.

For further information on property division in the court see “Property and Money”.

How much child support will I owe?

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Property Division – Field & Basson

Field & Basson – [2013] FamCAFC 32

This is an appeal on the division of the property made by the courts between a husband and wife following their divorce.

The wife, aged 47 and the husband, aged 48, were married in 1994 and separated in 2009.  The wife brought assets amounting to $373,471 to the marriage, including five properties, furniture, a car and cash.  The husband brought to the marriage assets amounting to $45,000, including a car, cash and one property plus a superannuation of over $2,000.  Both worked at the time of the marriage and the wife had additional income from her investment properties.

The couple developed a business together and as it grew, the husband resigned from his employment and received his superannuation, which had a gross value of almost $107,000.  The husband and wife both worked in the business and the husband helped maintain and renovate the wife’s properties.  They also took out a loan on the business, and the loans were secured through mortgages on two of the wife’s properties.  The business was not successful and in 2011 the husband found employment elsewhere and only the wife remained working at the business.  In December 2011, the wife suddenly shut down the business.

The Federal Magistrate

The Federal Magistrate gave orders for a property settlement in March 2012.  The judge calculated the assets and liabilities of the couple, including the business, their debts and all of the properties.  The Federal Magistrate took into consideration each partner’s contribution – both financial and nonfinancial – to the asset pool.  He also adjusted the wife’s contributions since she had the greater responsibility for child care and the husband earned more money.   He concluded that the wife should receive 87.5% of the net assets and the husband should receive 12.5% of the assets.

The wife made it clear that she did not want to sell any of the property in order to pay off the debts.  In order to end the joint property relationship, the judge ordered that all of the business stock as well as the jeep should be transferred to the husband, and the wife retains her property and the debt.

Husband appeals – division of property not weighted correctly

The husband claimed on appeal that the judge erred by giving more weight to the wife’s contributions than to the husband’s.   The appeals court began it’s response by explaining that they cannot interfere with the discretion of a lower court judge unless the decision was “plainly wrong”.   It is not enough to say that the appellate court would have come to a different decision in order to overturn the lower court decision.

The appeals court rejected the husband’s first claim on appeal that too much weight was given to the wife’s initial contributions.  The Federal Magistrate clearly stated in his decision that both parties contributed equally but the wife brought in “significantly greater initial contributions”.   The husband never articulated the basis of his claim, other than to bring several other cases, which he then asked the judge to ignore.

The appeals court also rejected the husband’s claim that a weighting of 25% to the wife was incorrect and that more weight should have been given to his non-financial contributions.  The husband provided no information that would demonstrate that the Federal Magistrate, who detailed how he came to his assessment, was “plainly wrong” in the conclusions he reached.   The appeals court cited earlier cases which also translated the “qualitative” contribution of an asset to a “quantitative” number.   The appeals court found that the judge described his reasoning and used his discretion appropriately.

Finally, the appeals court rejected the father’s claim that the Federal Magistrate assumed first that all sides contributed equally and only then made adjustments.  The Federal Magistrate clearly delineated the contributions from each side and the weight of these contributions and only than concluded that they were equal (other than the wife’s significantly greater initial contributions).

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