When a couple separates, whether they have been married or in a de facto relationship, they usually need to resolve how to divide their assets, including property, superannuation, debts and other liabilities. The courts have discretion under s 79 of the Family Law Act 1975 (the Act) in deciding how property will be divided between the parties and it sets out the various issues that the courts must consider in making a decision on such matters.
There are various ways that the parties can determine the division of their assets:
- They can agree on how their assets and property should be divided without any court involvement;
- If they can agree on such arrangements, they can seek to formalise their agreement by applying for consent orders in the Family Court or by a Binding Financial Agreement; or
- If they cannot reach agreement on such arrangements, either party can apply to a court for financial orders, including orders relating to the division of property and payment of spouse or de facto partner maintenance.
How does a court decide how to divide assets and debts?
In all cases, the court decides how property is divided by considering the specific facts of each case. The court considers all the evidence presented on behalf of both parties – and the requirements under the Act – in order to make a just and equitable decision.
The Act sets out the general principles the court considers when deciding financial disputes after the breakdown of a marriage (Sections 79(4) and 75(2)) or a de facto relationship (Sections 90SM(4) and 90SF(3)). These principles are the same for both marriages and de facto relationships, and are based on consideration of:
- what assets and property the parties own and what debts they owe;
- the direct financial contributions made by each party to the marriage or de facto relationship including via wages and salary;
- any indirect financial contributions by each party to the relationship such as gifts and inheritances from families;
- the non-financial contributions to the marriage or de facto relationship such as caring for children and homemaking; and
- the future requirements of the parties. Accordingly the court will take into account circumstances such as age, health and financial resources of the parties and the need for the care of children and each party’s ability to earn in the future.
Accordingly, a court order as to the sharing of assets and debts between the parties will depend in every case on the specific circumstances of the particular family.
Common issues considered
Some issues that are often considered by the court include entitlement to property that was owned before the marriage or de facto relationship; the issue of homemakers and stay at home parents; and business property.
In relation to property brought into a marriage or de facto relationship, current case law suggests that at the beginning of the marriage, greater weight will be given to the ownership of such property. However, its importance is diminished the longer a couple stay in the relationship. The use and payment of maintenance of the property during the relationship is another factor that the court will consider in its assessment of how to divide such assets.
Stay at Home Parents
There are no specific rules that a court has to consider when assessing the contributions or entitlement of a party that stays at home. However in taking into account the property that is available to be divided between the parties, the rights of a stay at home partner will not be prejudiced having regard to the principles outlined above.
Decided cases in Australia indicate that if one party is involved in a business, the other party may be entitled to benefit from the profits of such business. The court will have regard to the contribution made by the other party to the relationship, including issues such as the maintenance of the home and the caring of children.
Is there a time limit for applications for property adjustment?
If the parties were married, an application for property adjustment must be made within 12 months of the divorce becoming final.
If the parties in a de facto relationship, an application for property adjustment must be made within 2 years of the breakdown of the de facto relationship.
If the parties do not apply to the court within these time limits, they will need special permission of a court to apply out of time. This is not always granted.
If you require further information, please get in touch.
(Disclaimer: The material in this article is of a general nature and intended for information only. It is not intended to be comprehensive and does not constitute legal advice. Any person with a specific legal issue should consult a lawyer.)