How Do I Calculate My Divorce Property Settlements in Australia?

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Dividing The Property In Australia

Transcript

Hi, I’m Vanessa Mathews for Mathews Family Law & Mediation Specialists, and I’m going to be talking about property distribution today. Property distribution is about how the assets and liabilities of the marriage or de facto relationship are divided.

Assets are the things of value that you own, like, a home, a car, a bank account, investments, savings, superannuation, and furniture. Liabilities are the things you owe to others, like, a mortgage or a loan or even credit card debt.

For the most part, when it comes to questions of property and property division, de facto couples have the same rights and obligations as married couples. But some of the laws are different for de facto couples, depending on the state or territory they’re living. So you should always get professional legal advice to be sure how the law applies to your particular situation.

When a couple splits up, if they are married or if they’re in a de facto relationship, all of their property, both the assets and the liabilities, have to be divided between them. That is, they have to decide who owns what and who owes what.

When people come to me for help, I often hear things, like, ‘I don’t have to give him anything. I earn all the money, so it’s all mine.’ Or ‘She spent so much of our money over the years, she doesn’t deserve anything.’ Well, the law doesn’t work on emotions, but instead on the assumption that both people contributed to the marriage, perhaps in different ways, but both worked for the benefit of the shared union.

Now, some couples divide their property by themselves or with help from friends or professionals. If you choose to work it out just between the two of you, you can decide to split your property however you like. Generally, if you work with lawyers or through mediation, you have to follow the same four-step process the court uses, which I’ll discuss later on.

You can also do this property division at any time before you’re married and this is called a prenuptial agreement or even after you are married or when you’re in the process of divorcing.

Once you come to an agreement and sign this document, you can submit it to the court by applying for a Consent Order, if you want to, but you don’t have to. The court will allow you to make your own decisions but will want to know that each of you had professional advice when you made the agreement so that one side is not being duped or misunderstood something.

A Consent Order means your agreement has the strength of a court decision. So if one side breaches or goes against the agreement, you can take action against them immediately, without having to first sue, and get a court verdict.

If you can’t work out the property issues on your own, you can go to the court and let a judge decide for you. The law has a very logical approach to dividing up the property, which is the four-step process I mentioned earlier. The first step is to figure out what actually are the marital assets and debts. You can start out by putting everything together, the house, cars, mortgage, loan, furniture, and calling that your property. If the couple has been together for only a short time, the court might remove certain things from the pile of matrimonial property. These are things that belonged to each individual before they married or started their de facto relationship.
So if you brought a car or a house to the marriage, and then you got divorced, the car would be yours. In the same way, if you came with a mortgage to the marriage, that debt is still yours if you get divorced.

But if you’re married for say, 10 or 15 or 20 years, a court, if it goes to court, will probably consider most of your joint marital property. And despite the rules in other countries, even property one partner may have inherited during the marriage or de facto relationship, is still considered joint marital property.

The second step of this four-step process is to consider the contributions each side made to the marriage. There are two types of contributions partners can make. One is clear financial contributions, like, salaries, other types of income, inheritance, actual money or some type of physical property. But there are also non-financial contributions. For example, if one parent stayed home to take care of the children, they’ve contributed by saving money on daycare and enabling the other spouse to develop professionally and earn more. And by simply helping the family unit develop.

The next step is to consider the future needs of each partner. If the couple is older, and one partner never worked outside the home, the court will take into consideration that he or she may need more of the joint property, since they are less able to now go out and find a job. On the other hand, the court will also note that there are no small children, the mortgage is paid off, and there are no large expenses to be paid. So the financial needs are smaller than they once were.

If both people are young professionals with a good future outlook, the court will take that into consideration too. Also, does one partner still have to stay home to care for the children for an extended period of time, leaving them with less income? The court will also look at the health of each person. The one thing the court does not consider is whose fault is it, that the marriage or de facto relationship ended.

Australia has no-fault divorce, meaning there does not have to be a reason or cause for the divorce, other than one side asking for it. So blame has no impact on the property.

The fourth and final step is for the court to take all of this into consideration and make a just and equitable division of the property. That is, the court will split up the assets and the liabilities in a way that gives each partner what he or she needs and deserves. Just and equitable doesn’t mean everything will be split evenly and each person gets 50 percent. When the court decides who gets what and who pays what, the court will explain how this process will work.

So if the superannuation needs to be split, but the side can only get money in ten years, the judge will need to decide what happens in ten years or if there is a house and its value needs to be split between the two sides, the judge will decide if it should be sold, and the money from the sale divided or if one person will pay the other person his or her share, or if one person keeps the house and the other gets some other property of equal value.

A few suggestions I would make when you begin thinking about dividing your property, make sure that as you create a list of your assets and liabilities, you don’t overlook anything significant. For example, people often forget superannuation or other retirement plans.

If you’re thinking about separating or if you’re in the process, and the need to be plain about how you’re going to deal with your property, start gathering documents, like, financial statements, tax returns, mutual fund statements, bank statements, check account statements. Make copies if you can, and keep them in a safe place.

If you have questions about property distribution or any of the issues related to divorce and separation, please visit our website, and feel free to call me to set up an appointment. I’m Vanessa Mathews from Mathews Family Law & Mediation Specialists.

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 if my spouse has international property but has not disclosed it?

Overseas property is an asset and must be declared along with all other property of the marriage or de facto relationship. Failure to disclose property can result in an unfavourable result to the non-disclosing party.

Full and frank disclosure must be demonstrated when identifying and declaring assets. Failure to fully disclose may later provide the Court with the option of favouring the other party due to dishonesty or lack of credibility on the part of the non-disclosing party.

How is domestic violence considered in a family law property settlement?

Family violence or domestic violence often accompanies relationship breakdown. Domestic abuse can take many forms and can have disastrous effects on the lives of adults and children.

Where violence has such a profound impact on the victim that they were unable to contribute financially to the family or contribute non-financially to the welfare of the family, then violence may become a factor in a property settlement.

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 of s 75(2).

The four step process to family law property settlements

When you apply for a property settlement, the Court uses a ‘4-step’ process to determine the application as follows:

Step 1: Identification and valuation of assets

This step involves identifying and valuing the assets, liabilities and financial resources of the parties.

The property includes all possible interests of the parties whenever and however acquired. It includes both properties presently possessed and property expected (for example inheritance.) It may also include assets and liabilities disposed of in the past.

Property and financial resources are recognized separately. Property can be sold or transferred today, whereas a financial resource (for example superannuation or a damages claim) cannot be separated from a person.

Property must be identified at the date of settlement, not at the date of separation. When identifying assets full and frank disclosure should be demonstrated.

This is a simple step in many cases, but for some cases, particularly those involving businesses, the valuation exercise can be quite complex and require the assistance of experts.

How are liabilities treated in a family law property settlement in Australia?

Liabilities are given similar importance to the property of both parties. The net asset pool is commonly determined by calculating total assets and then subtracting total liabilities as follows:

Net Asset Pool = Total Assets – Total Liabilities

Liabilities are deducted from assets regardless of which party is responsible for incurring or paying them. The net asset pool is then shared between the parties on the basis of the contribution of each party and consideration of the additional factors/‘future needs’.

Liabilities to deduct from the asset pool include:

mortgages,
credit card debts,
tax liabilities,
overdrafts and
personal loans.

Debts are usually shared unless one party has wasted assets of the marriage (for example, gambling or efforts to deliberately decrease the asset pool). These debts are not deducted from assets as liabilities normally would be.

Debt might not be included where a family member has lent money. The reason for excluding this type of debt is that there is often a possibility that this debt will not be collected. This type of debt may arise in various situations and may be owed to people other than family members.

Full and frank disclosure must be demonstrated when identifying and declaring assets. Otherwise, the Court has the option of favoring the other party due to dishonesty/lack of credibility on the part of the non-disclosing party.

Click here to calculate your asset pool using the Matthews Family Law Asset Pool Calculator .

Step 2: Contributions of each party

The contributions made by each party to a marriage fall into the following categories:

financial contributions,
non-financial contributions,
contributions to the care and welfare of the family and
contributions in the capacity of homemaker or parent.

In many cases, particularly where there has been a long relationship, the determination will be that the parties have contributed equally. The contribution of the parties may be viewed as something other than equal, where:–

the relationship is short and there are no children, here the main concern will be about direct financial made by each of the parties;
a partner has brought considerably more assets to the relationship than the other party;
one of the parties contributed substantially via an inheritance, gift or personal injury settlement;
a partner has special skills or has made outstanding efforts that have brought substantial wealth into the relationship; or
a partner behaved in a deliberate or reckless manner resulting in a loss to the parties.

Assets are usually split half-half and then any necessary adjustments are made, taking into account all other factors including contributions.

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

Financial contributions

Financial contributions are any monetary contributions made to the marriage either:

before the marriage,
during the marriage or
after separation.

The financial contributions made by each party make up the asset pool.

Career assets are also financial contributions. They include contributions such as income, long-service leave and redundancy payment.

Notional assets are included as financial contributions. Notional property can be items such as legal costs and money spent on individual pursuits such as gambling.

Financial contributions made before the marriage

Sometimes a party brings a property to the marriage. Deciding how this property is shared depends on how the property is used and how the other spouse contributes to the property. The interest of the spouse bringing the property may be eroded by the passage of time and by the other party’s contribution to it and the asset will then be added to the asset pool.

Financial contributions made during the marriage

Financial contributions can be made towards purchasing, maintaining and improving the property. They can be made either directly by a spouse or on behalf of the spouse.

A lottery win would be a financial contribution made during the marriage if the ticket is purchased during the marriage using joint funds. The winnings would be a ‘joint contribution’ and would be shared as such.

The beneficiary spouse of an inheritance may be allocated the assets of the estate, in circumstances where there is a substantial quantity of assets in the asset pool. Otherwise, the inheritance is divided. The timing of the inheritance will be an important consideration.

A compensation payout is usually seen to have had both spouses contributing. The entitlement of the injured spouse is based on suffering and the entitlement of the other spouse is based on the contribution of caring for the injured spouse.

Financial contributions after separation

There are two methods of considering entitlements to property acquired after separation.

The first method considers how the property is used and how the other spouse contributes to the property. The interest of the spouse owning the property may be balanced by the other party’s contribution to it and the asset will then be added to the asset pool.

The second method looks at contributions after separation made by the non-owner spouse towards all matters concerning both parties.

Case: Husband wins $5M in a lottery after separation

In Farmer and Bramley, the husband acquired a winning lottery ticket 20 months after separation. The prize money was $5,000,000. Until the win, the parties had no property after a relationship of 12 years. There was one child of the marriage who lived with the mother. The wife was entitled to $750,000 as she cared for the child after the separation and also cared for the husband during the marriage, nursing him through a heroin addiction.

Career assets in a family law property settlement

Sometimes one spouse obtains a valuable qualification whilst accumulating minimal property, meanwhile, the other spouse takes additional responsibility for financial and family support. In these circumstances, the career assets of the qualification-earning spouse are brought into the asset pool as a financial resource. The spouse without the qualification can be awarded payments for the extra responsibilities accepted and carried out.

Career assets can be difficult to value, as different qualifications take different amounts of time and effort to complete and may or may not lead to employment.

A partnership interest in a business is property, however such interests are often considered to be personal and not transferable to a third party such as a spouse.

Prospective long service leave and redundancy payment entitlements will only be regarded as property if payments have been received.

If a spouse is a company director, shares owned by the director in this company will form part of the asset pool, however assets owned by the company will not. Any shares held in public or private companies can be included as property in the asset pool.

Notional assets in a family law property settlement

Financial resources may include legal costs paid, the property disposed of for the benefit of only one of the parties, expected inheritances and gifts from parents. These financial resources are calculated and allocated by the court or according to an agreement between the parties.

Income is usually not included as a financial asset and is not considered property for the purposes of a property settlement process in NSW. However, it can be taken into account as an additional factor. A party with little in terms of financial assets may be awarded more property assets to compensate, this is in the interests of ensuring a just and equitable result.

Money earned after separation is usually not ‘added back’ into the asset pool. However, there are some exceptions, for instance, if the funds arise from selling a business asset after separation where the business operated during the course of the marriage, then the funds may be included in the asset pool.

Case: Taxi license sold after separation

Usually funds accumulated post-separation are not added back into the asset pool, however, in some cases they can be. In the case of Townsend and Townsend, the money earned from selling a taxi license was included in the asset pool. The reason for including the money was that the license had value during the marriage and therefore the other party was entitled to a proportion of the proceeds from the sale.

Legal costs are usually considered notional property and are included in the asset pool. It is necessary though for these funds to have been earned prior to separation.

Certain types of expenditure are considered to be national property and will be ‘added back’ into the asset pool. These types of expenditure include gambling, behavior contributing to addictions and extravagant gifts. If add back occurs then the reasonableness of the expenditure is taken into account and the assets added to the asset pool must be of a reasonable amount.

Non-financial contributions

Non-financial contributions to life as a couple are an important and significant consideration for a property settlement in Australia.

Non-financial contributions made to the marriage are contributions involving services where a professional or tradesman might have been employed had the party not performed the work.

Examples include maintenance and renovations of the family home, cars, or any other asset owned by the couple.

Maintenance and renovations

Non-financial contributions may increase the value of a property or save on maintenance costs. They are included as they effectively increase the value of the property or funds available. Factors considered are the quantity of work undertaken, the worth of the work and the party completing the work.

Contribution to the care and welfare of the family

Domestic and family welfare contributions have received increasing recognition and importance. Since 1983, these contributions have gained the status of a separately considered contribution.

Where one party works outside the home to support the family and the other takes care of the family contributions to the care and welfare of the family are an important consideration.

Examples of contributions to the care and welfare of the family are:

caring for children,
school drop-off and pick up,
taking children to sports and other activities and
responsibilities as a homemaker.

Case: Wife placed in domestic servitude granted 75% of assets

A man who married his sixth wife lost 75% of his assets, including his house and his business

Step 3: Assessment of additional factors (s 75(2) factors)

The third step involves assessing the future needs of each party. Factors to consider include:

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.

Re-partnering is a commonly assessed factor. The financial situation resulting from the new relationship may influence the property settlement.

If a property settlement application proceeds to Court, the Court may place a great deal of weight on these factors or it can choose to decide they have a minimal impact. The Court will apply an adjustment in favour of one or other of the parties to compensate for any difference in their future circumstances.

Step 4: Just and equitable requirement

Unless the property settlement is fair, the arrangements should not be finalized. This requirement is the fourth step in the four-step process of determining a property distribution as provided by the case Hickey and Hickey. What is just and equitable depends on the circumstances of the particular case.

What is just and equitable in family law proceedings?

After assessing steps 1, 2 and 3, the Court must decide whether the final result is fair for each of the parties. To achieve this aim it is important for both parties to know their obligations and entitlements. What is just and equitable depends on the circumstances of the particular case.

Case: Husband receives $1M out of a $66M property pool

An example of the just and equitable considerations being applied can be seen in the case of Cook v Langford. Here, the total property pool was $66 million, however, the Court found that the husband was only entitled to $1 million based on his overall position and contribution to the assets. This was considered as neither unjust nor inequitable.

Deciding what is just and equitable requires:

considering the effects of the findings of the first two steps (specifically Step 1: What assets are in the asset pool? Step 2: What contribution did each party make?);
considering the effects of the determinations regarding the contributions of the party which are influenced by the s 75(2) additional factors (specifical factors such as the age and stage of the health of each party, responsibility each party to care for a child, the income, property and financial resources of each party); and
deciding what order is just and equitable taking into account all the circumstances of the parties.

This final step recognizes that the calculation of percentages or an equal distribution is not necessarily the fairest outcome. For instance, one party may have an amount in superannuation that is equal to the property in the asset pool. If this party receives the superannuation and the other party receives the property in the asset pool the distribution is equal. However if the superannuation cannot be used for several years, the outcome is unfair. It is for the judge to decide what is just and equitable, with the main concern being the present and future needs of both parties.

Click here to apply sample percentage divisions of your asset pool using the Mathews Family Law & Mediation Specialists Asset Pool Calculator.

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 is involved in a family law property settlement?

There are a number of issues to be considered for a property settlement, some of which you may not even have thought are relevant, such as your and your former partner’s superannuation entitlements.

Further issues to be considered may include:

– Assets and liabilities of each party

– How much did each party contribute financially

– Domestic duties performed by each party

– Who looked after the children

– Superannuation

– Any gifts received and

– Inheritances.

Property settlements

One of the most important, and perhaps the most difficult, issues facing couples who separate is the question of ‘who gets what?’ The Family Law Property Settlements Act provides for property settlements between couples who are, or have been, married and also couples in a de facto relationship (including same sex couples). Most property settlements are dealt with by the Federal Circuit Court or the Family Court.

[Case: John and Kate’s Separation]

Strict time limits apply to commencing property settlement proceedings in a Court. You must apply for a Court Order within two years from the date your de facto relationship ended or within one year from when your divorce order became final. It is important that you seek proper legal advice as soon as possible (including while contemplating separation).

The lawyers at Mathews Family Law & Mediation Specialists Melbourne have extensive experience negotiating property settlements for couples who have a substantial asset pool, such as a major property/share portfolio or a family business. We understand both the emotional and the commercial implications of splitting assets. We are committed to ensuring a fair settlement is achieved as quickly as possible, we aim to reduce the time taken and therefore the cost to you.

Mathews Family Law is a law firm based in Melbourne. Please contact us on +61 3 9804 7991 to speak with a family lawyer from our law firm today. You can also send through your enquiry online now and we will contact you shortly.

Situation Example – John & Kate’s Separation

After ten years of marriage and two children John and Kate decided to separate. John had provided the funds to buy their first house and had spent an enormous amount of time improving the family home. He faced a dilemma, he didn’t want to leave the family home but if he stayed he was afraid he and Kate would end up having a major fight. John was afraid fighting would scare the children or that Kate might decide he shouldn’t see the children anymore .

I want to end my relationship but my ex-partner won’t move out of the house that we own. What can I do?

Both you and your ex-partner are entitled to live in your home after separation regardless of whose name is on the title. You cannot be forced to leave just because the property is not in your name. The only way you can be forced to leave is if the Court orders it.

If you do have to move out, it will not affect your property entitlement. Your rights continue even if you leave. If you fear violence, you should seek advice immediately.

Sometimes one party may seek a sole occupancy order which requires the other party to leave. This allows the remaining spouse to live in the house until the property is divided. This order will usually only be made in exceptional situations where there is domestic violence, threats are being made or if the house has been adjusted because somebody has a disability.