A property settlement is a family law agreement or order which divides the assets, liabilities and superannuation that you have when you are going through a divorce or separation.
You have to finalise a property settlement within 12 months after your divorce, or 2 years after you separate if you were in a de facto relationship.
There is no waiting time after you separate, before you can start a family law property settlement. If you reach agreement quickly, you can finalise it either using an Application for Consent Orders, or a Binding Financial Agreement.
It is only once you are divorced (if you were married) or have been separated for a year (if you were not married) that time becomes important.
Once you are divorced or have been separated for a year, you only have 12 months from that date, to finalise your settlement.
If you have not reached agreement on a property settlement and the 12 months is approaching, then you need to apply to court. If you don’t you can forever lose your right to make a claim for a family law property settlement or spousal maintenance.
If you are concerned that your time limit to start a family law property settlement has passed, contact us urgently.
We can give you advice about whether or not you can apply to proceed after the time limit.
If your time limit is approaching (12 months from divorce or 2 years after separation if not married) then we recommend you contact us urgently to ensure your time limit does not expire.
This is a common myth.
In Australia there is no starting point of a 50/50 division of property.
There are a range of factors that are considered and there is nothing in the Family Law Act which suggests a 50/50 split of assets.
There is no mathematical formula for a family law property settlement.
There is no starting point of 50/50.
The Family Court and Federal Circuit Court both apply a process set out in the Family Law Act and interpreted by the Full Court since 1975.
Step One: Identifying and valuing the property pool
The property pool that will be divided will include all assets, debts and superannuation owned (or partially owned) by either spouse, regardless of when it was bought or the debt incurred.
That means all assets prior to the relationship and all assets after separation.
Property is valued at the date it is being divided, not at the date of separation.
Step Two: Assess the contributions to the property pool
- owning property before the relationship commenced
- receiving an inheritance
- family members loaning money or assisting to improve the value of the property
Generally, an analysis of the exact amounts earned by each person is not undertaken. A broad approach is taken.
Importantly, a person’s contributions as a homemaker and parent are given as much weight as the main income earner’s financial contributions.
At this step, a range of percentage entitlement is estimated. In longer marriages this is often equal because of the length of the relationship and how people have changed their lives and made decisions as a result of the relationship. However, that is not always the case and the court has a discretion. Different judges (and lawyers giving advice) will place different weight on different contributions.
Step Three – Factors warranting an adjustment
There are factors which can result in an adjustment to the percentage estimated at the end of Step Two. They are known as the ‘section 75(2) factors’ (referring to the section of the Family Law Act in which they appear).
Not all factors will be present in every case and some may not have any at all. They include:
- the age and health of each spouse
- Whether one spouse has significantly more care of the children
- The income of each spouse
- The earning capacity of each spouse and the impact of the marriage on each spouse’s earning capacity (i.e.: increase or decrease)
A percentage adjustment may be made at this step. The size of the adjustment is relative to the size of the property pool (that is, you can expect a smaller adjustment in a larger property pool because the dollar value of the adjustment is higher).
Step Four – Justice and equity
This step involves deciding how to divide up the assets based on the percentage result. It’s not a case of ‘sell everything and split the proceeds’ but looking at the realities of life by allocating assets in a certain way.
It is important to remember that there are no guarantees going to court. Ever. No family lawyer, regardless of their experience, can tell you with absolute certainty what your result will be.
Different judges place different emphasis on different aspects of a case. Three judges deciding the same case could come up with three different decisions.
That’s why so few people actually proceed to a final trial and resolve their matter via dispute resolution
Application for Consent Orders
The usual way to finalise a family law property settlement is by using an Application for Consent Orders and lodging it in the Family Court. The Family Court provides a DIY kit and you can lodge it all without a lawyer, if you choose.
However, the DIY kit only assists with half of the process. You still need the Orders drafted to go with the Application – and that is the tricky bit!
We encourage you to complete as much of the Application yourself. This will save you money on legal fees.
We then draft the Orders to give effect to your agreement and check the Application.
The other party can choose whether or not to get their own legal advice.
Once everyone has signed both documents, they are lodged with the Court.
Once the Application for Consent Orders is filed with the Court, what happens?
A Family Court Registrar will read the Application and Orders and decide if they are ‘just and equitable’.
They will also check if the Orders match what is in the Application and do what is needed. If they don’t pass the test, they will be sent back to you. This does not usually happen if the documents have been prepared by a lawyer.
We often have people contact us to fix up their documents where they have filed them and the Family Court has rejected them.
It can take a few days, or weeks for the Orders to come back from the Court.
Binding Financial Agreement
A Binding Financial Agreement is an alternative to an Application for Consent Orders to finalise a family law property settlement.
Some people, incorrectly, believe that it is a cheaper option to Consent Orders. This is simply not the case.
A properly drafted Binding Financial Agreement will cost more than an Application for Consent Orders. It requires both parties to have comprehensive, independent legal advice. So, if you use a Binding Financial Agreement, you both have to have lawyers. If you use an Application for Consent Orders, you choose whether or not you use a lawyer.
Why would I use a Binding Financial Agreement to finalise a family law property settlement?
You might have agreed to a settlement that a Registrar of the Court might not approve. For example, we have clients who have agreed to keep property in joint names for an extended period or to run a business together. The Family Law Act requires the Court to end the financial relationship of the parties, so it would be hard to get that deal past the Court.
Another reason is where you want to make provision for spousal maintenance, or make sure no-one can make a claim. If we put spousal maintenance into a Family Court Order, it can be varied by the Court down the track. A Binding Financial Agreement can ensure this does not happen.
So which should I use – a Consent Order or a Binding Financial Agreement?
If you have reached agreement, contact us to talk about which documents will be best for you to finalise your family law property settlement.
We offer fixed fees for both Applications for Consent Orders and Binding Financial Agreements.
Superannuation is treated as property under the Family Law Act and can be ‘split’ between spouses, whether married or de facto.
Superannuation that is split from one spouse to another is no different from any other superannuation. It cannot be accessed unless you satisfy a condition of release (usually retirement) or can prove financial hardship. However, only a limited amount of superannuation can be withdrawn under financial hardship and can result in significant tax being taken from the payment.
The except to this is the superannuation withdrawl permitted as part of the COVID-19 Coronavirus government package.
Like all family law property, superannuation is divided based on an assessment of the entitlements of each party.
There is no automatic 50/50 for any property – including superannuation.
However your superannuation will be included in the property settlement.
Sometimes a family law judge will divide all property along the same percentage lines (e.g.: 60/40). Other times, the non-superannuation assets will be divided along a certain percentage (e.g.: 55/45) and the superannuation will be ‘equalised’ so that each party has the same amount of superannuation after the family law property settlement.
How your superannuation is treated will depend on the circumstances of your case as there is no rule.
For more on how a property settlement is decided, read the link above “How is a family law property settlement decided?”
Spousal maintenance is a payment made by your spouse if you cannot support yourself from your own income.
In North America, spouse maintenance is called alimony.
Spousal maintenance is not automatic.
First, the person seeking maintenance needs to establish that they cannot meet their reasonable needs from their own income.
What is reasonable is considered by looking at the living standards of the couple prior to separation and each person’s situation now. That does not mean that the standard of living has to be replicated (which is often impossible as it takes more to run two households that one). However, it is not reasonable for one person to live in luxury and the other in poverty.
If the person seeking maintenance has a shortfall after deducting expenses from income, then the same exercise is done with the other spouse.
If that spouse has a surplus/capacity to pay, then an order for spousal maintenance can be made.
Income from all sources – with one exception – is included when working out a spousal maintenance claim. This includes wages and salary, child support, dividends, interest and trust distributions.
The exception is that an income-tested pension, benefit or allowance is not included as income. So, Centrelink benefits such as parenting payment and family tax benefit are excluded.
This is to ensure that spouses support each other before the taxpayer does.
If your former partner relies solely on Centrelink benefits and your child support payments are insufficient to meet their needs, you may be liable to pay spousal maintenance.
Income-tested benefits like Centrelink are excluded when calculating a need for spousal maintenance.
Child Support is administered by the Department of Human Services (Child Support Agency) and only in a very limited range of circumstances will it be dealt with by the Family Court.
It is intended as a payment to support parents with the costs of children.
Spousal maintenance is under the jurisdiction of the family law courts and is a completely separate assessment and payment.
The Family Court can end a spousal maintenance order if there is any ‘just cause’ to do so.
Circumstances which have been found to be ‘just cause’ include:
- the recipient of maintenance no longer needs the maintenance for their support (e.g.: an increase in income so they no longer have a shortfall, if the maintenance was not paid)
- a change in circumstances of the maintenance recipient such as entering into a stable and continuing de facto relationship
- a change in circumstances of the maintenance payer (e.g: decrease in income, ill health, ill health of a new partner)
- a significant change in the cost of living
- if the spousal maintenance order was made by consent–that the amount ordered to be paid was too high or too low
- false evidence or withholding material facts a court was false
If you are a liable party to a spousal maintenance order and believe any of the above circumstances may apply, contact us for advice about your options to vary or discharge the order. We will always try to do this without the need to go to court.