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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 martial 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 martial 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 a 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 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 for 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.

Consent Orders in family law property settlements

Parties are often able to come to an agreement about a property settlement without Court involvement. If you and your partner reach an agreement you can apply to the Court for Consent Orders which is a relatively simple and inexpensive process.

Full and frank disclosure must be demonstrated when identifying and declaring assets. Otherwise, your Consent Orders may be subject to a review and the Court has the option of favoring the other party due to dishonesty on the part of the non-disclosing party.

Legal representation is essential to ensuring full and proper consideration is given to all matters. When Consent Orders are sought, there should be enough information before the court to enable the court to make its own enquiry as to the justice and equity of the Consent Orders.

The lawyers at Mathews Family Law & Mediation Specialists Melbourne have extensive experience negotiating family law property settlements. We will carefully consider all aspects of your case and advise you on your specific situation. We will then negotiate in an attempt to reach an amicable outcome. 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 leading family law firm in Melbourne. Please contact us on 1300 635 529 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.

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?

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