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Property Division – The Basics

Whether you were party to a valid marriage or a de facto relationship, you are entitled to property division. While the courts maintain broad discretion with regard to property division, they strictly adhere to the following four-step process to determine who gets what.

1. Identify/value the property – includes all assets and liabilities
2. Consider contributions of the parties – includes financial and non-financial contributions
3. Consider relevant factors – including but not limited to age, health, income, an standard of living of the parties
4. Ensure order is just and equitable – the order must be fair

Generally, the courts will look to split the net asset pool of the parties equally, unless while applying steps one through four it is apparent that an unequal split of the assets would be just and equitable.

The goal of property division is to both to allow parties to finalise their economic relationship, and also to recognise contributions to property. However, while the goal is to allow the parties to reach economic independence, a valid property order may in fact be varied under certain circumstances.

Property Division – The Details

The Family Law Act provides for property division for both formerly married couples, as well as de facto couples. There are two main goals when it comes to property division. First, this should be a step towards finalizing the economic relationship between the parties. This “clean break” principal is supported by the requirement that courts make orders that will end the financial relationship of the parties as far as practicable. Second, this process recognizes contributions to property, both financial and non-financial.

An action for property division must be brought timely. For instance, if you were formerly married you must bring any property proceedings within 12 months of when your divorce order became absolute. Alternatively, if you were in a de facto relationship, you must seek property division prior to two years after the end of the relationship

Broad Discretion

The court maintains broad discretion when it comes to making property orders. For instance, should the parties disagree as to the ownership of property, the court has the discretion to make a declaration regarding the property in question.

Even the language in the Family Law Act speaks to this notion that the court has an abundance of discretion; the exact language expresses that the court may make “such order as it considers appropriate.” This broad discretion is subject to seven restrictions/considerations the court must contemplate. These considerations listed below are enumerated in the

Family Law Act.

• the direct and indirect financial contributions of the parties
• the non-financial contributions of the parties
• contributions to the welfare of the family, including contributions as homemaker or parent
• the effect of any order on the parties’ income earning capacity
• the list of considerations in s 75(2) and 90SF(3) of the Family Law Act
• any other order made under the Family Law Act affecting a party or child of the marriage or de facto relationship
• any child support payable, or likely to be paid in the future

Finally, the last bit of guidance that the Family Law Act offers to the court, is that the court shall not make an order unless the circumstances indicate that it is both just and equitable to make the order.

Because the Family Law Act fails to provide strict guidelines with regard to property division, and the courts are given such broad discretion, the courts have adopted a four-step process to apply to property orders. First, the court must identify and value the property, then consider contributions of the parties, then consider the factors listed above, and finally consider whether the order is just and equitable.

Step One: Identify and Value Property

The court must identify and value a rather encompassing pool of property, which includes real property, assets, liabilities, financial resources, property presently possessed and property expected, as well as property disposed of. The court must also identify and value business interests, licenses, permits and professional qualifications, inheritances, insurance policies, among many other types of property. As you can see, the type of property is pretty much anything – the list is rather extensive.

Both the nature of the property as well as the value must be determined as of the date of the decision, rather than the date of separation or divorce. When determining the value of the property, the court will begin by considering the fair market value of the property. Fair market value generally refers to the amount that a willing (not anxious) purchaser who is adequately informed would pay a willing (not anxious) seller of the property. In some instances where there is a dispute as to the value of property, and the court cannot make a determination of the value, the court may order the property be sold.

Once the property has been identified and value, a simple formula is used to determine the net asset pool of the parties. The total assets minus the total liabilities will result in the net asset pool used by the court.

Step Two: Contributions

The court will consider financial contributions, non-financial contributions, contributions to the care and welfare of the family, and contributions in the capacity of homemaker or parent. Financial contributions are any monetary contribution related to acquisition, conservation, and improvement of the property and refers to contributions made before the marriage, during the marriage, and after separation. On the other hand, an example of a non-financial contribution would be where one party performs maintenance or renovations of any family asset.

Often, especially when considering long relationships, the court will make a determination that the parties contributed equally. However, each situation is unique, and may not call for a determination of equal contribution. The court can make necessary adjustments to account for your unique circumstances.

One situation that is given special attention with regard to contribution is violence. If violence during the marriage or relationship had an adverse impact on a party’s contributions to the marriage, the judge will consider this when assessing the respective contributions of the parties.

Step Three: Additional Factors

This step helps the courts in addressing the future needs of the parties. The court will consider all relevant factors, including but not limited to:

• the age and state of health of each party,
• the income, property and financial resources of each party and their physical and mental capacity for achieving gainful employment,
• responsibility for a child of the marriage who is less than18 years old,
• commitments necessary for a party to support themselves or to support any other person that the party has a duty towards,
• eligibility for a pension, allowance or benefit,
• the standard of living which is reasonable in the circumstances,
• whether the relationship has affected the earning capacity of a party and to what extent,
• if either party is living with someone else, the financial circumstances arising from cohabitating with another person,
• the terms of any Orders made in relation to the property of the parties and the terms of any binding financial agreement.

Step Four: “Just and Equitable” 

The last step in the property division scheme requires to court to ensure that the proposed order is both just and equitable. This step is intended to allow the court to take a step back from the proceedings, and a whole, determine if the order is appropriate. The order should only be finalised if it is fair for each party. What is fair for one couple may not be fair for another couple, and thus determining fairness is wholly dependent on the circumstances of each individual case.

Variations of Property Orders

Despite the objective of ending the economic ties between the parties, property orders may in fact be varied after they have been issued. Variations are only permissible under certain circumstances. The Family Law Act only allows for reconsideration of a property order where both parties have consented, or where one party makes an application and the court is satisfied that at least one of the following is applicable:

• there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence, etc.
• circumstances have arisen since the order was made that has rendered it impracticable for all or part of the order to be carried out
• a person has defaulted in carrying out an obligation imposed by the order, and as a result it is just and equitable to vary or set aside the order
• circumstances have arisen since the order relating to a child or the marriage or relationship, and hardship will occur if the order is not set aside or varied
• a proceeds of crime order concerning property of the marriage or relationship, or such an order has been made against a party to the marriage or relationship.

Should you be in a situation where you anticipate property division, the best thing for you and your former partner to do is to work through steps one through four before bringing property proceedings. This will often help you avoid having to go through litigation to arrange for your property division.

Superannuation in Property Division

When a couple separates or divorces, or a de facto relationship[i] ends, a property must be divided. The 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 – is 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 interesting split, which means each partner receives a superannuation interest. With an interesting 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 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.

Contact Mathews Family Law to speak with one of our specialist solicitors and family law property lawyers to discuss your superannuation split today. Call our office on 03 9804 7991 and book a consultation with a divorce and family law attorney.

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

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).

If both parties have reached a property division agreement, how can they be sure their agreement is binding and enforceable?

Parties are often able to reach an agreement about a property settlement with the help of their lawyers. Where parties reach an agreement they can apply to the Court for Consent Orders which is a relatively simple and inexpensive process. When Consent Orders are made the parties gain the benefit of knowing their agreement is binding and enforceable.

What do we do if we can’t agree on the property division?

Many people have trouble dividing their property on their own.  Divorce is a time of emotional upheaval, bringing with it anger, loss of trust and generally an inability to communicate and be fair.  This is where the court steps in.

Couples can turn to the Family Court or the Federal Circuit Court to request financial orders.  This is a court order, dividing up the property – both assets and liabilities – of a couple.

Can family violence affect the division of property?

If there has been violence in the relationship, this can affect the division of property. This is due to the possibility that the effects of violence may have limited the ability of a party to contribute.

Alternatively, violence or other conduct may have resulted in long term effects to the party’s health and therefore could be a factor to consider under the ‘additional factors’.

What happens when parties cannot agree about the division of property?

If negotiations fail and you cannot reach an agreement with your former partner about your property settlement then you will need to file an application for property settlement in the appropriate Court.

There are ongoing opportunities for settlement of the proceedings, even after filing an application with the Court. Most applications are settled by consent and without a decision being made by the Court.

If a settlement is not reached, then the Court will decide how the property should be divided after a hearing which follows the four step process.

What happens when parties are able to reach an agreement about the division of property?

Your family lawyer will carefully consider all aspects of your case and advise you on your entitlements. Your lawyer will assist you to negotiate with your former partner in an attempt to reach an amicable outcome.

Parties are often able to reach an agreement about a property settlement and they can then apply to the Court for Consent Orders which is a relatively simple and inexpensive process.

If Consent Orders are made then the parties can rely on the knowledge that their agreement is binding and enforceable. An additional advantage is that certain tax benefits may be available to you.

An alternative to Consent Orders is a binding financial agreement which has different considerations and benefits.

What happens when the parties are unable to reach an agreement about the division of property?

If you cannot reach an agreement with your former partner then an application for property settlement must be filed. There are ongoing opportunities to settle proceedings before a decision is made by the Court. Where a settlement is not reached then the Court will make a decision as to how the property of the couple should be divided after a hearing. If the property is complex then the Family Court will hear the matter.

Divorce Property Settlement in Australia

At Mathews Family Law and Mediation Services, we have wide experience in matters related to divorce property settlement. We take the time to understand your concerns and offer the best possible solutions based on your individual situation. Our family law property settlement lawyers have an unrivaled reputation and can help you make an informed decision. We understand that separation is a stressful phase and assure you that we will be there for you when you need us. Reaching a mutually acceptable financial agreement in divorce can be daunting. With our bespoke service, we will approach your case to deliver a favorable financial outcome. We are driven by the zeal to ensure a fair settlement and you can count on us even for the most complex cases.

Divorce Settlement in Australia

At Mathews Family Law and Mediation Services, we have wide experience in matters related to divorce property settlement. We understand that even if your finances are separate, there is a need for a formal financial settlement. Our experienced divorce lawyers possess the expertise and understanding to enable you to handle the financial aspects of divorce as successfully as possible. We will outline ways to reach a fair settlement so that you do not face any legal disagreements in the future. Approachable and experienced, our lawyers will help you get the results you want.

Reaching Financial Agreement in Divorce

After you have taken the decision to divorce, sorting out the financial aspects can be a complex task. There is much to consider but with the backing of our expert property settlement lawyers, you can be sure that you will be supported at every step. We take the time to understand your concerns and offer the best possible solutions based on your individual situation. Our property settlement lawyers have an unrivaled reputation and can help you make an informed decision. We understand that separation is a stressful phase and assure you that we will be there for you when you need us. Reaching a mutually acceptable financial agreement in divorce can be daunting. With our bespoke service and clear legal advice, we will approach your case to deliver a favorable financial outcome. We are driven by the zeal to ensure a fair settlement and you can count on us even for the most complex cases. We will ensure that your interests are protected and the divorce proceedings are as amicable as can be.

If you have any queries about family law property settlement, do not hesitate to book a consultation. We are here to answer any questions that you may have and will be happy to guide you through the process of a divorce property settlement.

Property Settlement Lawyers

If you have any queries about family law property settlement, do not hesitate to book a consultation. We will be happy to assist you.