Back to Basics – what’s a fair property settlement?

In other jurisdictions across the world, there are laws that married parties divide their assets equally after separation, while other countries have concepts such as “community property” and “own property”.

In Australia, the outcome of a property settlement division is as unique and varied as the individuals themselves. This is because the Family Law Act sets out a pathway to divide assets on a basis that is just and equitable having regard to many and varied factors, but generally following a staged process as follows:

  1. Identify the interests of the parties as currently held, and determine whether, as a preliminary question, it is just and equitable to make any order that changes the currently held interests of the parties. There are circumstances where the parties already hold their interest in a way that is equitable (e.g., in some short relationships) and so no property adjustment is required at all.
  2. Once it is determined that the property interests ought to be adjusted between the parties, identify the values of all the assets, liabilities and other resources of the parties and, in most circumstances, “pool” those values together to arrive at a net value.
  3. Compare the contributions the parties have each made to the respective roles in their relationship and make an assessment of the percentage contribution by each at the commencement of the relationship, during the relationship, and if there is a long period of separation or post-separation as well. Contributions can be categorised as financial, non-financial, and homemaker/parent contributions. An example of this assessment might be to consider that during lengthy relationships parties have equalled out their contributions over time if one party was the primary breadwinner and the other took primary responsibility as the homemaker and for the parenting children of the relationship. Other contributions that might have weight toward a more significant adjustment to one of the parties might be an inheritance or personal compensation payout received by one party and used toward the acquisition of assets or reduction of debt. In short relationships, it might be appropriate to look at each asset individually and consider how the parties contributed to those particular assets, rather than to the whole pool.
  4. Compare the competing future needs of parties in respect of how they will individually support themselves, and how they will provide support for any minor children of the relationship. This most commonly involves weighing up the respective earning capacities of the parties, whether they have skills that could allow them to return to the workforce or if they will require a period of retraining, whether there are any health issues that also impact a person’s need for support, and the extent to which caring for children may also limit a person’s ability to earn and be self-supporting. An adjustment of the percentages at this stage may be made for a person who is more in “need” of support.
  5. After undertaking the above assessments and arriving at a proposed percentage, apply that percentage to the assets to determine how they might be able to be divided, and consider whether this is equitable and practicable having regard to the nature of those assets and the circumstances of the parties.

Property settlement division is complex, and legal advice should be obtained before finalising any proposed division after separation.

Recommended Posts