How does a Court decide how to divide our property?
A party’s property settlement entitlements are based on the principles set out in the Family Law Act 1975.
The Court follows a five-step process to determine an application for property settlement entitlements.
- Is it just and equitable?
- What is the property pool and its value?
- Who made what contributions during the relationship?
- Are there any other relevant factors to be considered – referred to section 75(2) factors?
- Is it just and equitable?
The Court must decide whether there should be an adjustment to the parties’ interests in the property available to be divided.
Each party is under a positive obligation to make full and frank disclosure of their financial circumstances to each other. This means that each party must identify their assets, including money in any bank account, real property, any debts that are owed to the party, shares in any company, any chattels, such as jewellery or furniture. Parties also must make full disclosure of their superannuation interests. The Court needs to be told about all the property that they own or have an interest in. That can also include trust property.
It does not matter when each party acquired the asset (whether before, during or after the relationship). The same applies for any debts or liabilities.
The parties may agree on what something is worth. If they cannot then the item (whether it is the family home, or a car, or shares in a private company or a business) will need to be valued by an expert. Property is valued at the date it is being divided, not at the date of separation.
Contributions to the relationship include financial and non-financial contributions (direct and/or indirect), made by and on behalf of each of the parties to the acquisition, conservation or improvement of property, as well as homemaker and parenting contributions.
Contributions are assessed at the beginning of the cohabitation (initial contributions), during the relationship and after separation.
Homemaker and parent contributions may be given as much weight as the main income earner’s financial contributions.
In addition to the contributions made by a party towards the property available to be divided, the Court must also look at a variety other factors in deciding what adjustment (if any) should be made in favour of one party or the other. These factors are known as the ‘section 75(2) factors.’ The factors include:
- Whether either party has the care of a child of the relationship;
- The age and state of health of each party;
- The income, property and financial resources of each the parties;
- The physical and mental capacity of the parties for appropriate gainful employment;
- The earning capacities of each party and how the marriage has affected your earning capacities (i.e. increase or decrease);
- Commitments that are necessary for each party to support themselves or any other person;
- A standard of living that is reasonable in the circumstances;
- The amount of any child support being paid;
- Whether, in all the circumstances of the case, the proposed order is ‘just and equitable’; and
- Other relevant facts.
After weighing up those factors, a Court might make an adjustment to the contributions-based entitlement nominated at Step 3.
In the final stage, the Court looks at how best to divide the property based on the percentage range. This does not involve selling everything and dividing “the cash.” It is about dividing the property in a way to meet the parties’ needs and realities of life. This is stage where the Court checks to see that the orders proposed to be made are in fact, just and equitable.
