By Savanna Bull
One of the first questions that people often ask when separating, is how their assets (property) will be divided. The division of property is a crucial component of separation and understanding how it works can help individuals make informed decisions during what is often a very challenging and emotionally fuelled time.
In accordance with the legislation, the division of property needs to be just and equitable. However, what constitutes ‘just and equitable’ is where it can get confusing and is often clouded by misconceptions including a belief that a 50/50 split of the asset pool is automatic or that a person has no entitlement to property if there is no legal ownership.
Savanna Bull, Solicitor at Orbell Family Lawyers (located in Erina), provides an overview on how the Family Law Act and case law deals with the division of property for separating couples and explores some of the common misconceptions that arise in a property settlement.
What is the starting point when dividing your property?
The first step in the process of a property division is to identify what assets, liabilities, superannuation and financial resources each person has an interest in, whether that be in their sole name of held jointly with another person. This is known as the property pool.
Even if an asset or liability is held in the sole name of one of the parties, it will still be considered in the property pool.
Each couple is different, and the assets and liabilities that make up a separated couple’s property pool will vary. Nonetheless some typical examples include:
- Assets: the family home and investment properties, motor vehicles, cash and bank accounts, furniture, jewellery, shares, and interest in a business
- Liabilities: Mortgages, personal loans, tax debts, HECS debts and credit cards
- Superannuation: Industry and retail funds and self–managed funds
- Financial Resources: Interest in a trust, leave entitlements, and anticipated inheritances.
It is sometimes the case that individuals are not aware of their ex–partner’s assets or liabilities or the value of each of those items. Fortunately, each party to a family law property settlement has duty of disclosure and they are required to provide all information and documents relevant to the property settlement to the other party. This duty of disclosure allows both parties to be able to identify all items that make up their property pool.
However, even when financial disclosure has been exchanged and the assets, liabilities, superannuation and financial resources have been identified, there may still be disagreements about the value of certain items in the property pool, such as the family home, a motor vehicle or an interest in a business.
If an agreement cannot be reached as to the value, the parties may be required to undertake valuations to ascertain the accurate value of certain items in the property pool.
Contributions, Future Needs and Just and Equitable – What does it all mean?
Once the property pool and the values of each item are identified and agreed to, the next step is to assess whether there needs to be any adjustment of the parties’ ownership of their property pool.
In some circumstances, it may not be just and equitable for any adjustment to occur and the fair outcome is that the parties should each retain all property in their sole name.
This is most often the case when there has been a short relationship or where the parties have largely kept their finances separate and do not own any property jointly.
However, if an adjustment of property interests is required to achieve a just and equitable outcome, the next step is to consider the contributions that each party has made at the beginning of the relationship, throughout the relationship and since separation.
The type of contributions that need to be considered include:
- The direct financial contributions made by each person to the acquisition of assets or the preservation, improvement or maintenance of those assets. This will include assets owned at the commencement of the relationship. Some examples of direct financial contributions include payment towards a deposit on a house, receipt of an inheritance which has been applied to property and payments towards a mortgage
- The indirect financial contributions made by each person in the relationship which include for example payment of groceries, utilities and other living expenses which allow the other party to make mortgage payments
- The non–financial contributions by each person, including caring for children, undertaking home duties and chores and maintaining or improving the assets by renovations that increase the value of an asset.
Once the contributions of each party have been considered and assessed, the next step is to identify and consider the future needs of each of the parties. It may be the case that one party may have considerations in the future which means they require an adjustment of the property pool in their favour to achieve a just and equitable outcome. These future need factors will often be unique to each matter however can include factors such as a party’s age, health, financial resources, superannuation, care of children and income and earning capacity.
Just and Equitable Division
There is no presumption that an asset pool should be divided equally, and a separated couples’ property pool can be divided in any percentage split that is just and equitable.
Unfortunately, there is no equation that can be applied to determine what property division is just and equitable. This will be wholly dependent on the unique facts and circumstances of each family.
No two families are the same and as seen above, there are a number of considerations and complexities that come into play when determining how a separated couple’s property pool should be divided.
At Orbell Family Lawyers we specialise in family law and can help you to understand your entitlements in a property division and assist you to negotiate and finalise your property settlements without the need for Court intervention.
If you would like further information regarding this article or your family law matter in general, please contact us.
Mention this article when you call to receive a free 15–minute discovery call with one of our experienced family law solicitors. Phone: (02) 4314 6080 info@orbellfamilylawyers.com.au orbellfamilylawyers.com.au
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