How is property divided after separation in Australia?

Introduction

If you and your partner or spouse separate, it is important you understand how your respective property, including any assets, debts, and superannuation, are divided in a property settlement. This applies to anybody in a de-facto relationship or a marriage, but especially to individuals who own property, jointly or otherwise.

There is a common misconception that couples have a right to a “50/50” split in the event of separation. This is often not the case, and there are a multitude of factors that must be taken into consideration when determining a party’s entitlement in a property settlement.

In this post, I will answer the following questions:

1. What is defined as property?
2. Do I have to go to court?
3. What am I entitled to?

What is Defined as “Property”?

Firstly, it is important to define what property is before we can work out who is entitled to them.

In Section 4 of the Family Law Act 1975 (Cth) “property” is defined as “…property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion”.

Not all that helpful, that could mean anything!

In the case of Duff & Duff (1977) FLC 90-217, the Full Court defined property as “…that which belongs to person, exclusive of others, and can be the subject of bargain and sale. It includes goodwill, trademarks, licenses to use a patent, book debts, options to purchase, life policies, and rights under a contract.”

Better.

The above extract from the case of Duff indicates one very important thing: The definition of property is very broad.

Property can include assets such as:

1. Real property (houses, apartments, commercial buildings, etc)
2. Vehicles (cars, motorbikes, boats, jet skis, etc)
3. Personal effects (clothes, jewellery, tools, computers, white goods, etc)
4. Shares
5. Businesses (private companies [i.e., “Pty Ltd”], partnerships, or sole traders)
6. Cash (savings, physical cash in a safe)
7. Gametes (frozen sperm, frozen ovum)
8. Pets (that’s right – the law considers your fur babies to be property)

Property can include debts or liabilities such as:

1. Mortgages
2. Loans (personal, business, car, or HELP/HECS loans)
3. Credit cards
4. Hire purchase/lease arrangements
5. Tax liabilities (unpaid income tax, capital gains tax, stamp duty); and
6. Legal fees (yes – this can be included as a debt)

Property can include superannuation such as:

1. Industry Super or “accumulation” funds, like Mine Super, First State, Sun Super etc.
2. Defined benefit or pension schemes, often seen among members of the Defence Force or Police.
3. Self-managed super funds, which can sometimes own real property.

How is Property Divided after Separation in Australia?

In Australia, there is a five (5) step process in determining a party’s entitlement to property in the wake of a separation.

First Step – Identify and Assess the Value of all Property

The first step is to identify and assess the value of all the property in the “pool” for division.

This is usually done by exchange of financial disclosure documents, which can include things like tax returns, bank statements, payslips, and superannuation statements.

There is a require under the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) that the parties undertake “full and frank” financial disclosure. This means that when undertaking this process, you must be honest and transparent about your financial circumstances when dealing with your former spouse/partner or their lawyer.

Second Step – Should an Order be Made?

Sometimes, there is no need make Orders in relation to parties’ respective property interests, and the need to make an order (or not, as the case may be) is determined as the second step of this process. Circumstances in which an Order for property may not be necessary are:

1. A short relationship
2. No property
3. No joint property; or
4. No intermingling of finances (i.e. no shared bank accounts)

Step Three – Assessment of Contributions

The third step is to assess the contributions each party has made to the acquisition, conservation, and improvement of the parties’ property. There are three broad sub-categories of contributions:

Financial Contributions

These are contributions made by each of the parties that are financial in nature. They include things such as:

1. Making mortgage repayments
2. Paying other bills, such as utilities or rates
3. Expending money on living expenses
4. Purchase of other items of property such as cars.

Non-financial Contributions

These are contributions that improve the value of the property pool but are not “financial” in nature.

They usually take the form of improvement and renovation work to a piece of real property that increases its value.

Homemaker/Parent Contributions

These are contributions that relate to homemaking and care of children.

Homemaking refers to things such as cooking, cleaning, washing and maintenance of the household.

Step Four – Future Needs

The fourth step is to assess whether an adjustment ought to be made based on what each of the parties’ needs may be in the future. The following are common factors taken into consideration:

1. The age and state of health of each of the parties
2. The income, property, and financial resources of each of the parties, and the physical and mental capacity of each of them for “appropriate gainful employment”
3. Whether either party has the care or control of a child to the relationship
4. Commitments of each of the parties that are necessary to enable the party to support themself and a child or other person that the party has a duty to maintain
5. The extent to which either of the parties are eligible for pension, allowance or other benefit; and
6. A standard of living that in all the circumstances is reasonable.

Step Five – “Just and Equitable”

Lastly, when determining what a party’s entitlement ought to be, consideration needs to be given as to whether a proposed division is “just and equitable”. This effectively means that the outcome needs to be fair in all circumstances.

What Am I Entitled to in a Property Settlement?

As you can see, there is not a “one size fits all” approach to property settlement in Australia. The amount you may be entitled to will depend on how the five-step process outlined above applies to the particular circumstances of you and your former spouse/partner.

This is one of the many reasons why it is important to obtain independent legal advice, tailored to your specific circumstances.

Do you have to go to court?

No!

Court ought to be a last resort, or in very specific circumstances, an application can be made on the basis of urgency.

Generally speaking, where possible to settle the matter without the need for the Court’s intervention, it is preferable to do so. Methods of settling your matter without the need for the court’s intervention are:

1. Negotiation, either formally through solicitors, or informally in direct discussion with your former partner or spouse;
2. Mediation; a process that may or may not involve legal representation, in which you and your former partner or spouse retain a qualified mediator to facilitate a discussion and negotiation in relation to your property and finances; and
3.  Arbitration; a process in which you and your former spouse or partner retain an arbitrator (usually an experienced barrister or retired judge) to “hear” the dispute and make a decision in relation to the property and finances. It may help to think of arbitrators as “private judges”, and their decisions are binding on the parties.

Conclusion

In Australia, the way in which property and finances are divided after a separation differs considerably from case to case. The court has a broad range of discretion to make orders that are “just and equitable” to ensure that you and your former partner or spouse receive a fair outcome.

At Turnbull Hill Lawyers, we have a team of trusted family law experts who can provide you with advice and representation to ensure you receive a just and equitable division of your property after separation. We act for clients in Newcastle, Central Coast, Sydney, the South Coast, New England, and Northern NSW.

Contact us today and let us help you get the outcome you are entitled to.