Blog post by Meroë Kuhl
The law regulating property settlements is contained in the Family Law Act 1975 (Cth) (‘FLA’). All references below are to the FLA unless otherwise stated.
The purpose of a property settlement is to bring to an end the financial relationship between the parties (see s81 of the FLA for married relationships and s90ST 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.
Following a separation, many clients will come to a family lawyer for advice as to a property settlement believing that the property will be split straight down the middle, that is, a 50/50 split. They may otherwise assume that a 50/50 split is the starting point for negotiations as to a final property settlement. Calculating a property settlement under the FLA is in fact far more complex than people believe.
Firstly, the Court will make an assessment as to whether it is ‘just and equitable’ to adjust the legal and equitable interests that the parties have in property. In other words, should there be an adjustment, and on which basis?
Secondly, the pool of assets and liabilities, and its value, must be ascertained. The net pool of property and its value is usually considered at the date of property settlement, even though this may be some months or even years after separation. This process can be particularly intricate where there are business interests, self-managed superannuation funds, family trusts and can be frustrated by non-disclosure or deceit.
Thirdly, the contributions made by each party to the acquisition and maintenance of those assets are to be considered (see s79(4)(a)-(c) for married relationships and s90SM(4)(a)-(c) for de facto relationships), and include:
- a party’s direct and indirect financial contributions, such as property owned at the commencement of the relationship or property received as a gift;
- a party’s direct and indirect non-financial contributions, such as unpaid work undertaken to property to improve its value; and
- a party’s contributions to the welfare of the family, including those made in the capacity of homemaker or parent.
Fourthly, the calculation must also consider the future needs of each party being those matters referred to in s75(2) FLA insofar as they are relevant. Such considerations include the age, health and future earning capacity of each party, and whether either parent is the primary carer of the children of the relationship.
Finally, the Court must 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 s79(2) for marital relationships and s90SM(2) for de facto relationships).
It is possible that a 50/50 calculation may be arrived at as per the common misconception. However, in most cases, undertaking the calculation provided by the FLA will result in one person receiving more of the assets than the other.