Some years ago, there was a news report of a married couple in Cambodia who, when separating after 40 years of marriage, agreed to divide their home and its contents by sawing the house in half. This must be the most literal interpretation of a property split.
The wife kept the half of the house that was standing, while the husband carried off the other half of the home and installed it in a nearby field.
The news report went on to state that the couple took the drastic action to see their house in half as they felt that court proceedings to determine their property split would be too expensive.
The above story is a dramatic example, but it does capture the effect of a property split very well – upon separation, each party will walk away with a certain portion of the couple’s total asset pool.
How should married and de facto couples split their property on separation?
Under family law in Australia, there is no presumption of a 50-50 split of the couple’s total asset pool, even if parties have been married for a very long time. Instead, the Family Court will only make an order for a property split when satisfied that “in all the circumstances, it is just and equitable to make the order”.
The key is that the proportion and manner of the property split must be “just and equitable”. In simple terms, this means what is right and fair.
The Family Court has wide discretion to determine what is “just and equitable”. Generally, the court will go through a 4-step process to determine the proportion and the manner of the property split. This is applicable to both married and de facto couples. This process is only a guide, and the Family Court’s powers is not confined by any “step” or “stage” in exercising its discretion and reaching a decision that is just and equitable.
The four steps are as follows: –
Identify and value all current assets and liabilities of the relationship. This includes: –
- assets to which the parties, or either of them, are entitled. This would encompass assets held in one party’s name or in joint names or held by both or one of the parties jointly with third parties;
- assets in Australia or overseas;
- assets that were acquired by each party before the relationship started, during the relationship and after the relationship ended;
- assets used by both parties or used solely by only one party;
- assets for business or personal use;
- assets held in any type of trust controlled by one or both of the parties.
Hence, all types and forms of assets must be identified and valued, including real estate, cash in the bank, stocks and shares, superannuation, business assets, cars, jewellery, companies, family trust interest and home contents.
Besides assets, all liabilities must also be identified and valued, including mortgages, personal loans, car financing, credit card debts and outstanding or expected tax liabilities.
If there is no agreement on the value, a valuation would be required.
The next step is to consider what each person has contributed to the relationship: –
- financial contributions made by each party to the relationship – this would include financial contributions for assets acquired before, during and after the relationship ended. This could be in the form of savings used to pay for the deposit for the home, earnings during the relationship to pay for the mortgage instalments and living expenses, each party’s inheritances and gifts received and other types of financial contributions.
- non-financial contributions made by each party to the relationship such as the care of the children, household duties and the maintenance of the parties’ assets.
When considering the respective contributions of the parties, the court must consider all contributions holistically over the whole period from the commencement of the relationship to trial. There is no strict mathematical approach to determine each party’s contribution. This holistic approach to the assessment of contributions accommodates the wide range of factual scenarios to be dealt with by the Court.
Consider the future needs of the parties, including:
- the age and health of the parties
- each party’s future income and financial resources (such as a family trust, or expected inheritance or compensation)
- each parties’ capacity for employment
- whether each party has care of a child
- whether each party has responsibility for looking after other people
- any other facts or circumstances which should be considered.
The final step is to take a broad or helicopter view to make sure that the proportion and manner of the property split is “just and equitable” in all circumstances of the case.
When considering the property split, the Family Court has broad discretion to alter the interests of the parties. The Family Law Act provides that in property settlement proceedings, the court may make such order as it considers “appropriate”. This means that each case turns entirely on the view taken by the Family Court of the facts and merits of that case.
Property splitting upon the breakdown of a relationship can be a simple or complex process depending on the asset and liability pool and the factual scenario of each case. It is best that before parties embark on negotiations or make proposals to the other party that legal advice of your rights and entitlements is sought.
For all enquiries, please get in touch with the family lawyers at Robertson Hayles Lawyers at (08) 9325 1700 or by email at email@example.com or via our contact form, and we will be happy to assist you with your property settlement arising from your family law matter. We also assist with de facto property settlement.