When couples separate, the question of how their property is distributed usually comes to the fore.
Particularly in circumstances where separating parties have built their life together and have bought and accumulated assets jointly, property settlement can be complicated.
To assist in the property settlement, the Court has created 4 main steps that the parties must follow:
- The net asset pool and valuation of assets;
- Each parties’ contribution towards the net asset pool;
- Future needs of parties and adjustments; and
- Is the result ‘just’ and ‘equitable’?
Step 1 – The net asset pool and valuation of assets
The ‘pool’ of total net assets, including superannuation and liabilities of the parties, must first be calculated in order for the Court to appropriately determine the distribution of financial property. It is crucial that both parties are honest in their disclosure of financial figures.
The total assets are calculated by adding together the values of all assets owned by each party.
Assets that must be included are:
- Property – including the matrimonial home or any investments;
- Jewellery; and/or
- Household contents.
In circumstances where a party is unsure about the value of an asset, an expert may be required to valuate the asset.
The total liabilities are calculated by adding together the values of all liabilities each party bears.
Liabilities that must be included include:
- Car loans;
- Personal loans; and
- Credit card balances.
The Net Asset Pool
The ‘Net Asset Pool’ is calculated using the above-calculated figures.
- Net Asset Pool = Total Assets (inclusive of Superannuation) less Total Liabilities
Step 2 – Each parties’ contribution towards the net asset pool
Once the net asset pool is determined, each parties’ contribution towards the net asset pool must be considered. This will assist the Court in determining how much each party should receive from the pool.
Financial contributions include:
Wages and income;
- The amount of money each party had prior to entering into the relationship;
- Any monies received from external sources – e.g. from winning the lottery, compensation payments, etc;
- Gifts; and/or
Non-financial contributions include:
- Homemaker contributions; and/or
- Including household chores such as vacuuming, cleaning, cooking, etc.
- Parental contributions
- Including: raising of the children, taking the children to/from school, homework, etc.
Step 3 – Future needs of parties and adjustments
The current and future needs are then assessed, and from there, the Court determines whether any adjustments are required based on these needs.
Factors which are taken into consideration include:
- Age – of both parties;
- Health – whether any party has health concerns;
- Income-earning capacity;
- Property owned by each party;
- Children – whether either/both have parental responsibility for any children;
- Care for other individuals;
- Reasonable standard of living;
- The need to protect a party;
- Any new relationships either party may have;
- Any related orders from the Court – e.g. bankruptcy, child support, etc.
Step 4 – Is the result ‘just’ and ‘equitable’?
Once the net asset pool is determined and the contributions and future needs are considered, the Court questions whether the proposed division split between each party is ‘just’ and ‘equitable’ for each party, in light of all the circumstances in their situations.
In other words, while the proposed division may seem suitable at face value, in practical terms it may be unfair to either party once it is put into practice.
If the Court finds that the proposed division would not be fair to either party, further adjustments may be made to reflect a fairer result.