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Property Division in Australia

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PROPERTY DIVISION IN AUSTRALIA BETWEEN SEPARATED COUPLES

The ending of a relationship whether married or de facto requires the consideration of dividing the assets and liabilities of the separating couple. There is where a Property Division comes in. 

 

How to divide the property fairly raises many questions and many factors need to be considered.

 

This article deals with four very common questions that arise about property division when a separation occurs.

Property Division Australia

WHAT IS THE DIVISION OF MATRIMONIAL OR DE FACTO PROPERTY IN AUSTRALIA

When a relationship ends there will be a need to work out a fair division of both the assets and liabilities of the separated couple.

 

This is sometimes called getting a divorce although a divorce is the actual legal ending of the marriage.

 

A better term to avoid confusion is a “property settlement”.

 

A property settlement can occur at any time after separation.

 

For married couples, separation needs to be for 12 months or longer to legally file for divorce.

 

If you are married, there is an automatic right to seek the court to assist in dividing property if the parties are unable to work out the division themselves.

 

There are some rules around de facto or unmarried couples going to court.

 

Usually either the relationship will need to be at least two years duration or the parties have a child together or have intermixed their assets to the extent that it would be unfair not to allow them to have a settlement through the courts.

 

It is always preferable to try and reach direct agreement with your former spouse about the division of property and avoid the expense and emotional toil of legal negotiations or a court process.

 

When an agreement is reached it is preferable to document that agreement in a written form.

 

For smaller asset pools a private agreement may be sufficient – for example if the house has already been sold and the parties are simply dividing the net profit proceeds and each retaining a motor vehicle and some small amount of superannuation.

 

The other alternative is to prepare paperwork which is binding on the parties and can’t be changed.

This can be done through filing paperwork with the court called a Consent Order or by preparing a written document called a Binding Financial Agreement which is not filed with the court however does require independent legal advice for both parties to sign off.

 

In working out what needs to be divided after separation you need to consider all the physical and other assets such as the house, motor vehicles, shares, any business and general chattels and cash but also the liabilities including mortgages, loans, credit cards and even potentially one or both parties HECS debt.

 

Importantly each party’s superannuation, which may be substantial, should also be taken into account and is often divided between the parties as needed.

Is my partner entitled to my property?

IS MY PARTNER ENTITLED TO HALF MY HOUSE?

A very common question which arises occurs when one party owns a house prior to the commencement of the relationship and whether at the time of separation the other party will have a claim against some part of the value of that house when they separate.

 

The simple answer is “it depends”.

 

There are several important factors or considerations in working out whether it is fair to take into account an asset in one party’s name owned prior to the relationship or purchased shortly thereafter.

 

These factors include the length of the relationship, what contributions were made by one or both parties to that asset after the relationship commenced – as an example did the parties renovate the house after commencing the relationship, did the parties both jointly financially contribute to the expenses of the house such as the mortgage and lastly, what are the future needs of the parties and is there any major difference between them.

 

For example is there a significant difference in income or does one party have the substantial cost of the majority care of a child/ren of the relationship.

 

In dividing property after separation, the court uses a number of considerations to work out a fair percentage division of the totality of the assets and liabilities to be divided to each party.

 

If, for example, the court determines that the wife is entitled to 45% of the overall net assets this will include assets which are in an individual’s name.

 

This does not mean that the husband’s house owned prior to the relationship needs to be sold but will mean that sufficient assets, including superannuation and cash need to be given to the wife to reach her 45% share.

 

This may mean that the husband will need to borrow against the house in his name to raise sufficient funds to allow the percentage adjustment to his former wife.

 

Generally, in negotiating a property settlement or when a court determines about dividing property, if a party owns a house or other assets prior to the relationship, then they will be given an opportunity, if possible, to retain them as part of the overall final property settlement.

 

Unfortunately, so that the parties can each have the percentage division that has been worked out or determined by the court, this may mean the sale of the house owned prior to the relationship.

WHAT IS THE AVERAGE SPLIT IN A DIVORCE OR PROPERTY SETTLEMENT?

There is no average split in a divorce or property settlement.

 

Every matter is treated on a case-by-case basis.

 

Very commonly the final division of property will fall within a percentage where one party receives between 50 to 65% of the total assets and liabilities including superannuation.

 

However, there are many exceptions or outliers to this.

 

Three examples include firstly when the relationship is of a very short duration and one party contributed the bulk or all the assets.

 

In this case, the party who contributed the assets to the relationship may well retain a very high percentage of the assets upon separation.

 

A second example is when the asset pool is very small and taking into account future needs and expenses (for example the majority care of children of the relationship) that the party with a greater future need may well require receive the bulk, if not all the assets to pay for those future needs.

 

The third example is where there has been some form of lump sum contribution by one party, such as an inheritance, during the relationship which is a significant value of the total assets the parties hold at the time of separation.

 

In these circumstances the court will give a heavy weighting to that contribution causing a significant percentage adjustment.

 

There are many nuances or exceptions when working out a fair percentage of distribution of assets between separated couple.

 

It is important to get legal advice from an experienced family law solicitor to get a preliminary understanding of the relevant factors and how they may impact a percentage distribution.

 

This can be used as a guide to direct discussions between the parties or ultimately in negotiations between solicitors to reach a fair outcome.

HOW DOES THE LENGTH OF RELATIONSHIP OR MARRIAGE IMPACT THE PROPERTY SETTLEMENT IN AUSTRALIA?

Property Division Australia

The length of relationship or marriage is an important factor in determining a fair distribution in a property settlement.

 

For example, many a judge has commented that if the relationship was 40 years in length, in other words a very long time, it is very difficult to determine an outcome that is not an equal distribution between the separated couple.

 

Conversely, a very short relationship could mean that one party contributed nearly all of the assets and fairly ought to retain them upon separation.

 

The general theory is that the longer the relationship, the less weighting is given to the initial contribution by one party or the other.

 

The reason for this is that the court will consider the financial and non-financial contributions during the relationship, which can be substantial, will outweigh what was the original contribution made by one party or the other.

 

As an example, in a 25-year marriage, the parties between them will have potentially earned several million dollars and together raised children to adult age. It is commonly raised however, that if one of those parties contributed a house or substantial equity in a house at the commencement of the relationship and where there was a significant increase in that property’s value, that this should be taken into account in favouring a percentage adjustment to the house contributor.

 

There is no set rule about these types of contributions, and you cannot guarantee whether one judge would allow that contribution to be accepted and weighted as a percentage adjustment, but another judge would ignore it considering the length of relationship and other contributions.

 

This is why it is important to look at obtaining early legal advice in negotiating a fair property settlement.

 

You will sometimes hear lawyers referring to marriages as either being short, of a medium length or a long relationship.

 

The reason for these references is to then look at the weighting of the initial contribution by either party and also what contributions were made during the relationship which may impact a consideration of a fair final property settlement.

MOVING FORWARD

Geoff & Maria Ebert. Founders Your Online Legal Group

Identifying a couple’s assets, liabilities and superannuation when separating, and then looking at how those assets were created are important steps in reaching an overall fair division between couples who separate. 

 

If you would like to look in more depth at this topic then read our article PROPERTY SETTLEMENT UPON SEPARATION IN AUSTRALIA