Property and Financial Settlements

PROPERTY SETTLEMENTS DURING DIVORCE

Division of property following the breakdown of either a marriage or De Facto relationship can be a daunting prospect. The assets, liabilities, and personal belongings the parties may have spent a lifetime growing together suddenly need to be dealt with and divided in a manner which is appropriate as against a variety of factors.

The settlement process for Married and De Facto relationships

Property settlements for both married and De Facto couples in Brisbane and throughout Australia are primarily determined based on similar principles. The applicable legislation for married couples is Part VIII of the Family Law Act 1975, while since May 2009, property adjustment for De Facto and same-sex couples has been incorporated into the Family Law Act 1975 (Cth) under Part VIIIAB.

The amendments made to the Family Law Act, effective from 1 March 2009, have brought the resolution of financial matters for De Facto couples within the jurisdiction of the Family Law Courts, aligning it with the process followed for married couples’ property division.

The property settlement process involves a four-step approach.

1.Identification and valuation of assets and liabilities.
2.Assessment of contributions made by each party, including financial and non-financial contributions.
3.Consideration of future needs, such as earning capacity, age, health, and childcare responsibilities.
4. Working towards a just and equitable outcome.

1.Identification and valuation of assets and liabilities.

When it comes to property settlement matters in Brisbane, Queensland, and across Australia, the first step is to identify the pool of assets and liabilities related to the marriage or De Facto relationship.

The general principle followed by the Court is to consider the entire property of the parties involved in order to achieve a fair and equitable division of the matrimonial pool. The definition of ‘property’ is extensive, encompassing almost anything of value. This includes assets acquired before or during the relationship, as well as those acquired after separation. Examples of property include real estate, shares, vehicles, jewelry, savings, furniture, and personal belongings.

Superannuation, however, is treated differently. Depending on the type and value of the fund, it may either be divided or subject to a ‘splitting order’ when property orders are made, if deemed necessary for a just outcome.

In addition to the assets, the Court takes into account the financial resources of the parties involved. This includes funds, assets under their influence or control, and potential entitlements in certain circumstances.

Valuation issues often arise when determining the net assets of the parties. Other factors such as taxation, including Capital Gains Tax, and stamp duty may also come into play. It is crucial for the parties to seek advice from their respective lawyers and accountants to ensure that all relevant issues are considered and appropriately addressed.

2.Assessment of contributions made by each party, including financial and non-financial contributions.

The second step in resolving property matters involves assessing the respective contributions of each party to the property and the well-being of the family, as outlined in section 79 of the Family Law Act 1975.

When determining the contributions made by each party to the acquisition, preservation, and enhancement of the property, the court considers both financial and non-financial contributions. This includes contributions to the welfare of the family, such as those made as a homemaker or parent.

Contributions to the property, whether made before, during, or after the end of the relationship, and regardless of ownership, are taken into account. If one party has made significant initial capital contributions, they generally receive substantial acknowledgment, especially in shorter relationships.

Non-financial contributions encompass the value of specific skills or expertise employed in acquiring or building up property assets.

In the case of gifts or inheritances received by one party from a parent or relative during the relationship, these are regarded as direct financial contributions by that party to the relationship. The court examines the facts to determine the contributions made by each party, particularly in their roles as homemakers or parents.

3.Consideration of future needs, such as earning capacity, age, health, and childcare responsibilities.

The subsequent step involves evaluating the future needs of both parties, considering various factors, such as:

Age
Health
Income-earning capacity
Property owned by each party
Care or support responsibilities for children
Financial circumstances of any new relationship

When determining the respective needs and resources of each party, the Court refers to the factors outlined in section 75(2) of the Family Law Act 1975. The Court considers any relevant facts or circumstances necessary for justice to be served, including the age, health, income, property, and financial resources of the parties involved. They also take into account the care of children under 18 years of age, responsibilities to support other individuals, earning capacity, eligibility for pensions, allowances or benefits, standard of living, duration of the relationship, the impact of the relationship on the earning capacity of each spouse, cohabitation with another person, and child maintenance payments.

In certain cases, an adjustment to the outcome based on contributions may be made after considering these factors

4. Working towards a just and equitable outcome.

In the final step of the property settlement process, the court assesses whether it is fair and equitable to make the proposed orders based on the outcomes of the previous three steps.

The fourth step may involve considering the optimal combination of immediate available assets and long-term benefits, such as superannuation.

This stage grants the court a broad discretion, which accounts for the challenge of providing “precise” advice in Family Law matters.

Dealing with Property Following Separation but Pre Settlement

When a couple decides to separate, one of the key considerations is how to handle the property they own jointly or individually. This includes situations where one party utilizes joint assets, such as accessing shared funds, making mortgage repayments, maxing out a credit card, or selling specific properties. In such cases, it becomes essential to analyse the intentions and purposes behind these actions.

Add Backs/Notional Property

Generally, expenses incurred by either party during separation for their post-separation lives will not be considered as part of the shared assets. However, it is advisable for separating parties to maintain detailed financial records, including the source of funds used for legal fees. Whenever possible, legal fees should be paid using income earned after the separation.

If certain property has been disposed of or transferred between the separation and the final settlement, it is treated as “notional property.” This means it is hypothetically included back into the pool of assets as property that is deemed to still exist.

The Family Law Courts have identified three common categories of “add backs”:

Legal fees: Although the court has discretion in this matter, if legal fees were paid from funds available to both parties at the time of separation, these funds are considered as a notional asset and added back to the party who benefited from them.
Premature distribution of funds: This situation typically arises when one party sells an asset and uses the proceeds for their personal benefit before the settlement. Such funds may be added back to the pool of assets.
Deliberate diminution of the property pool: This occurs when one party engages in “waste,” often involving reckless spending on activities like gambling, extravagant vacations, or lavish gifts. Unfortunately, it is the responsibility of the innocent party to trace the wasted funds and demonstrate that the other party has acted recklessly with the shared assets.

Valuation of Property

When it comes to finalising property matters with your spouse or former partner, there can be challenges in identifying and valuing certain assets. Our team of property settlement lawyers in Beenleigh and the Gold Coast are here to assist you during this potentially complex process.
These challenges can arise due to various factors, including:
1. Involvement in a business or having an interest in a company, trust, or partnership by either party.
2. Ownership interests of one or both parties in rural property, particularly when it is part of an ongoing family enterprise.
3. Situations where one party lacks awareness of the other party’s assets, necessitating investigative searches and inquiries to determine the net value of all assets.