The law regulating property division, otherwise known as property settlement, is contained in the Family Law Act 1975 (Cth). All references in this section are to this Act unless otherwise stated.
The law sets out how separated couples, whether they were married or de facto (see De facto relationships, Two year time requirement – property disputes), can go about dividing their property.
The purpose of a property settlement is to bring to an end the financial relationship between the parties [see s 81 for married relationships and s 90ST for de facto relationships]. A property settlement should therefore cover all of the property between the parties and should take into account the whole financial situation of each.
The Family Law Courts have the power to make property settlement orders which alter the interests of each of the parties to the property between them [see s 79 for married relationships and s 90SM for de facto relationships]. However, before making any orders, whether by consent between the parties or following a trial, there are four main steps that the Family Law Courts follow.
1. Identifying and valuing the property between the parties
This is the logical first step. Unless the property between the parties is identified and valued it cannot be divided in such a way as to end their financial relationship in a just and equitable manner.
Property includes both assets and liabilities. Commonly assets may include a family home or investment property, land, household goods, vehicles, money and superannuation, but it is worth bearing in mind other items, such as intellectual property, debts due to either of the parties, shareholdings, partnership interests, redundancy payouts or long service leave entitlements already received at the date of property settlement, entitlements as beneficiaries of a trust or a will etc. One thing that is not regarded as property is the ability to borrow, so one party will not be entitled to a larger share of the property on the basis that the other has greater borrowing power, but see the discussion of how differing future needs may be taken into account below. Liabilities may include a mortgage, credit card debts, overdrafts, personal loans etc.
Property (that is, assets and liabilities) belonging to a party before the relationship is still that party’s afterwards. There is no law that it must be automatically transferred into joint (both) names. The same applies to property acquired in only one party’s sole name after the relationship has ended. However, when it comes times for property settlement the law will look behind the legal title of all items of property then between the parties and ownership may be changed, notwithstanding whose name an item of property is in.
It is a good idea for parties who are separating to put together a list of all of the assets and liabilities between them (and record against the list in whose current ownership or control each asset or liability is in).
The net pool of property and its value is usually considered at the date of property settlement (whether by consent or at a hearing), even though this may be some months or even years after separation.
It is usually necessary to access and gather relevant documentation and/or independent market valuations to put together an accurate list, but estimates may be used in the meantime. To aid in negotiations, the parties may obtain drive-by valuations from real estate agents in relation to their family home or other investment property and use Red Book car valuations from www.redbook.com.au, but for the purposes of a court hearing, unless agreed, they will probably need to obtain direct expert evidence.
2. Consider the contributions of each of the parties
Next the Court would consider the contributions each party has made towards the property between them [see s 79(4)(a)-(c) for married relationships and s 90SM(4)(a)-(c) for de facto relationships].
The contributions up for consideration are not only those made during the relationship, but also those made at the very beginning of the relationship and those made after the relationship came to an end.
Contributions towards the acquisition, conservation or improvement of the property between the parties may be both direct or indirect and financial or non-financial.
Financial contributions may include:
- property owned at the very beginning of the relationship
- property received by gift or inheritance
- money put towards a purchase price, loan or mortgage, such as wages or other income
An indirect financial contribution towards the property may include money spent on household goods, groceries and utilities so that the other party could put money towards the purchase price, loan or mortgage.
Non-financial contributions may include:
- work done on the property such as renovating or building
- efforts put into building up and running a business
An indirect non-financial contribution towards the property may include acting in the capacity of homemaker or parent to allow the other party to go out and earn money.
Both indirect contributions mentioned above may also, and therefore rather, be considered as contributions towards the welfare of the family. Contributions towards the welfare of the family include those made in the capacity of homemaker or parent. A homemaker or parent can be entitled to a share of the property even though they have not earned any income or directly contributed any money towards the property during the relationship. In many instances, the contributions of the homemaker or parent are considered equal to direct financial contributions made by the income earner. This may not be the case where the direct financial contributions of the other party were large and/or the relationship was short.
3. Consider the future needs of each of the parties
After identifying and valuing the property between the parties and considering the contribution of each party towards that property and towards the welfare of the family, the Court would then consider the future needs of each of the parties and whether an adjustment should be made in favour of a party to take into account greater future needs [see ss 79(4)(e) and 75(2) for married relationships and ss 90SM(4)(e) and 90SF(3) for de facto relationships].
It would look at matters such as:
- the age and health of each party
- the ability of each party to support themselves in the future (e.g. income and earning capacity)
- whether either party is supporting another person, such as a child
- whether a party is being supported by someone else, such as a new partner
This is a highly complex area of law upon which legal advice should be sought.
4. Consider whether the proposed property settlement is just and equitable
The fourth and final step that the Court would take is to consider whether it is just and equitable in all the circumstances to make any property settlement orders and the particular property settlement orders that are proposed [see s 79(2) for marital relationships and s 90SM(2) for de facto relationships].
For more information, see Applying for property settlement.
The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.