Firstly, it is important to note that divorce and property settlements are treated as two different legal processes. A divorce is the legal recognition of a marriage ending whereas a property settlement is the division of assets. Although the two processes are related, discussions around both do not necessarily have to occur simultaneously. For instance, you can do the property settlement before or after divorce.
Common Misconceptions
There are some common misconceptions we hear from clients in initial consultations.
“Everything has to be split 50/50” – There is no family law principle that applies a 50/50 split in financial settlement matters. There is much more to consider when it comes to dividing assets.
“I have to go to Court to get a property settlement” – Even if you are finding it difficult to discuss dividing your assets with your partner, this does not mean you have to go to Court. More often than not, we will come to an agreement through mediation or negotiations between solicitors. At Clayhills Escobar Solicitors, we will conduct a holistic assessment of the asset pool, prospects of success and your best interests before advising you to go to Court.
So, how does the actual property split work?
In Australia, a property split is assessed through a four-step process.
- Identify and value the assets and liabilities;
- Consider contributions made toward the net asset pool;
- Identify future needs and resources;
- Determine whether the proposed settlement is just and equitable
I IDENTIFY AND VALUE THE ASSETS AND LIABILITIES
All assets and liabilities owned by the parties are included in the net asset pool irrespective of whether they were acquired before the relationship, during the marriage or after separation.
- Assets include anything of value such as real estate, shares or jewellery.
- Superannuation is included as an asset but is considered separately.
- Liabilities may consist of anything from an outstanding mortgage to credit card debt.
- Other financial resources that would not be included in the asset pool but thought of as a future financial benefit might be a beneficial interest in a trust or anticipated windfall.
II CONSIDER CONTRIBUTIONS MADE TOWARD THE NET ASSET POOL
In this step, the law considers three types of contributions made by each of the parties:
- Financial contribution;
- Non-financial contribution;
- Homemaker and parent contribution.
None of these contributions are more important than the other two types. However, importance is attributed to the length of time since the contribution was made and the impact that it had on the property pool. Therefore, in a short marriage with no children, the pre-cohabitation financial contribution will be critical.
Negative contributions can also be taken into account if it is deemed that one party has “wasted” the marital assets rather than “contributed”. For example, if one party lost a significant amount of assets on gambling, an adjustment may be made in favour of the other party.
III IDENTIFY FUTURE NEEDS AND RESOURCES
This step is described as “the s75(2) factors”. It calculates the future needs of each of the parties such as income earning capacity, age, health and who will have care and control of the children.
At this stage, adjustments can be made to the asset division based on the future needs of the parties.
IV DETERMINE WHETHER THE PROPOSED SETTLEMENT IS JUST AND EQUITABLE
Finally, the Court considers the practical effect of the proposed property settlement and assesses whether it is just and equitable. Some factors the Court takes into account is whether there has been full and frank disclosure of financial circumstance by each party and whether the agreement holds finality.
Seeking Legal Advice
The rules surrounding property settlements are complex and there is never one correct answer. To find out more about where you stand or whether the proposed agreement you have with your partner is equitable, book a free 30 minute consultation with our family law accredited specialist.
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