The division of property following the breakdown of a marriage or a de facto relationship is dealt with under the Family Law Act. The way in which the property settlement occurs is commonly referred to as the four step process.
Step 1 – Identifying the asset pool:
The asset pool is comprised of the following:
- Liabilities; and
- Financial resources
The assets of a relationship include all property, bank account, motor vehicles, furnishings, shares, businesses and superannuation. They can be held in joint names, individually or with a third party.
The liabilities are all the debts of the parties, such as mortgages, personal loans and credit card debts.
Financial resources are assets or funds that are not yet in the parties possession, but will be in the future. For example an inheritance that is in the process of being finalised is a financial resource.
Once you have identified the asset pool, you will need to agree the value of each item. If the value can’t be agreed, independent valuers can be appointed.
Step 2 – Determining the contributions of each party:
- Financial contributions – including assets brought in to the relationship, income from wages or investment income;
- Non-financial contributions – include contributions that have assisted the parties to build their wealth, such as renovating a house or assisting with the operation of a business of the parties; and
- Contributions to the welfare of the family – such as staying home and looking after young children that allows the other party to go out and work.
As you can see, its is not simply a matter of looking at who has brought the most money into the relationship.
Generally, the weight given to assets brought into the relationship will diminish the longer the relationship goes on.
Step 3 – Determining the future needs of each party:
Future needs in this context involves considering factors such as:
- The age and health of each party;
- The income and financial resources of each party;
- The earning capacity of each party;
- Whether a party is supporting a child or children; and/or
- Whether a party has financial support from a new partner
For example, if one party is in a high paying job while the other is a stay-at-home parent, the stay at home parent will generally have greater future needs than the other party, as the party in a high paying job will be able to rebuild their financial position far quicker.
Step 4 – Ensuring the property settlement is fair:
The final step is to consider all of the above factors and ensure that the settlement is “just and equitable” having regard to all of the circumstances of the case. If the matter is in Court then it is a Judge that will make their assessment, or a Register of the Court if your matter is being finalised by way of an Application For Consent Orders.
Formalising your agreement:
If an agreement is reached without court proceedings being started, then the agreement can be formalised and made legally binding by either a Binding Financial Agreement, or an Application for Consent Orders that are sent to the Family Court and approved by a Registrar of the Court.
If Court proceedings have already commenced, then you can still continue to negotiate an agreement, which can then be formalised by Consent Orders that are approved by the Judge who is dealing with your case.