Property settlement in family law is the formal division of assets between two parties following their separation. Property settlement occurs where the parties were married or in an eligible de facto relationship.
Under the Family Law Act 1975, the Family Court and Federal Circuit Court of Australia have the power to make orders altering the interests of the parties in the property of the relationship. The Court exercises a wide discretion in determining an appropriate property settlement so it is important that, following separation, parties seek legal advice about their rights and entitlements in relation to property settlement.
What is considered ‘property’ in a family law property settlement?
Property is defined very broadly in the Family Law Act as property to which the parties or one of the parties to a marriage or de facto relationship is entitled.
Property includes all property in the name of the parties jointly, in the name of one of the parties only, in the name of companies owned by the parties or one of the parties, property in the name of trusts controlled by the parties or one of the parties.
Property includes real estate, cars, funds in bank accounts, shared, investments, businesses, superannuation entitlements and long service leave.
How is the property divided?
The Courts will evaluate how the parties’ property is to be divided by applying a four-step process as described below.
Step 1: identify and value the property of the marriage or de facto relationship.
Note that some assets do not require valuation, for example funds in bank accounts. Other assets will require an independent valuation to determine their value, such as real estate, businesses, motor vehicles and defined benefit superannuation entitlements. Depending on the asset, a specialist valuer might be engaged to value the assets. Parties can opt to avoid the expense of obtaining a valuation if they agree on the value of the property in question.
Property is valued at the time of the property settlement and not at the date of separation. It may therefore be worthwhile for the high-income earner to finalise a property settlement quickly as they may otherwise acquire assets between separation and the property settlement which will be taken into account in the settlement.
Step 2: assess the parties’ contributions.
The Court will assess:
- Financial contributions by or on behalf of each of the parties to the acquisition, conservation or improvement of the property.
- Non-financial contributions made by or on behalf of each of the parties to the acquisition, conservation or improvement of the property. For example, if a party’s father spent every weekend renovating the parties’ home, that would be a non-financial contribution made on behalf of one of the parties that would be taken into account.
- The contributions made by or on behalf of the parties to the welfare of the family including any contribution made in the capacity of homemaker or parent.
Where there has been a long marriage or de facto relationship and both parties have acquired the property together over the course of the marriage or de facto relationship, a court may find equality of contribution.
Where one party was the primary income earner and the other party was the primary carer to the children and homemaker, a court may find that that the parties contributions to the marriage or de facto relationship were equal, where there were no gifts or inheritances received during the course of the relationship.
Gifts and inheritance received by a party during a marriage or de facto relationship will be taken into account when assessing that party’s contributions.
If a party owned property of significantly more value than the property owned by the other party at the commencement of the marriage or de facto relationship, this will be taken into account in assessing the parties’ contributions.
Step 3: consider Section 75(2) or S 90SF(3) factors.
When assessing how property should be divided between the parties to a marriage or de facto relationship, a Court must take into account the factors set out in section 75(2) or section 90SF(3) of the Family Law Act 1975. These factors include the following:
- The age of the parties.
- The state of health of the parties.
- The income, property and financial resources of the parties.
- Whether either party has the care or control of the child or children of the marriage or de facto relationship who was under 18 years of age.
- Any child support that is being paid by a party for a child of the marriage or de facto relationship.
- A court may make a percentage adjustment in favour of a party who has higher section 75(2) factors.
Step 4: evaluate whether property settlement is Just and Equitable.
A court must make an order for property settlement that is just and equitable in all of the circumstances. The court will look at what the proposed percentage split of the property means in dollar terms and assess whether it is just and equitable in all of the circumstances. A court has a wide discretion when determining a property settlement.
What documents do I need?
Each party has a duty to make full and frank disclosure of their relevant financial circumstances. Relevant financial circumstances include:
- A party’s income;
- A party’s interests in real property;
- Income earned by a legal entity fully or partially owned or controlled by a party to a marriage or de facto relationship;
- Any trust of which a party is an appointor or trustee or beneficiary or which a party otherwise controls;
- Any disposal of property by a party since separation or in the twelve months preceding separation;
- A party’s liabilities.
Parties may be asked to provide the following documents in order to meet their disclosure obligations:
- Statements for all bank accounts in their name or control for the previous 12 months;
- Records of any investments in their name or control, including stocks and shares;
- Tax returns and financial statements for any businesses in their name or control;
- Tax returns and trust deeds for any trusts in their name or control;
- Income tax returns and assessments for the previous three financial years;
- Statement showing the current balance of their superannuation entitlements;
- Real estate valuations or appraisals for real property;
- Redbook Valuations for motor vehicles.
A party’s failure to disclose his or her relevant financial circumstances may result in the Court imposing consequences. If it has been established that there has been deliberate non-disclosure, the court will not be unduly cautious about making findings in favour of the innocent party.
Is there a difference between Marital and De Facto property settlement?
There is no substantive difference in the law applied to married and de facto couples in relation to property settlement. The provisions in the Family Law Act relating to married couples are mirrored for parties to a de facto relationship.
For the purposes of the Family Law Act, parties are in a de facto relationship where:
- the relationship was for a period of at least 2 years; or
- there is a child of the relationship; or
- the relationship is or was registered; or
- the party applying for a property settlement made substantial contributions and it would be a serious injustice not to recognise their contributions.
There are also geographical requirements that must be met before parties to a de facto relationship can apply for a property settlement.
See more about de facto relationships here.
Are there any time limits for applying for property settlements?
A party to a marriage may apply to the court for an order altering property interests within 12 months of the date on which the Divorce Order takes place. In effect, the date of the Divorce Order starts the clock ticking. By way of example, if the parties divorce 5 years after separation, they have 5 years and 12 months from the date of separation to apply for a property settlement.
A party to a de facto relationship may apply to the court for a property order within 2 years of the date of separation.
A court may grant leave to a party to a marriage or de facto relationship to apply for a property order after the 12 month/2-year time limit if the party can establish hardship. This involves a party making an application to the Court for leave to proceed out of time. This is an expensive process however, and there is no guarantee that the court will grant the leave. It is very important for parties to be aware of time limits. See our blog entry for examples of cases where the Court has granted parties leave to proceed out of time.
How can Farrell Family Lawyers help with Property Settlements?
Farrell Family Lawyers have extensive experience in advising clients in a wide range of property matters, including complex matters involving companies and trusts. We can provide you with advice about your options and entitlements to empower you to make informed decisions. We aim to provide a favourable negotiated settlement for our clients in conjunction with alternative dispute resolution processes. If you reach agreement about your property settlement, we will draft Consent Orders formalising the settlement without the need for you to appear in court. If settlement outside of the court process is not possible we will advocate for you in court to achieve the best possible outcome. We invite you to contact us for further information about property issues.