The Family Court/Federal Circuit Court of Australia (“Court”) adopts a five stage process when dividing assets and financial resources during family law property settlements.
STEP 1 – IS IT JUST AND EQUITABLE TO ALTER THE PROPERTY INTERESTS OF THE PARTIES?
In most cases, it will be just and equitable to alter the interests of the parties. However, there have been cases when the Court has determined that it is not appropriate and therefore no property settlement should be made.
It is important that you seek legal advice to determine if you should be having a family law property settlement before engaging in negotiations or commencing court proceedings.
STEP 2 – IDENTIFY AND VALUE ALL PROPERTY
Before the Court can divide assets, liabilities and resources, it must be in a position to identify the value of the assets, liabilities and resources.
In the case of a house or motor vehicle, this is usually relatively simple. You can agree to a value or you can engage a registered valuer to formally value the property. It may be more complex where there is a business involved.
The value of superannuation must also be ascertained. Superannuation valuations are also often complex, depending on the terms of the fund and when contributions were made. The Court has the power to split superannuation entitlements as part of your property settlement.
Typically, assets are looked at according to their value at the time that the Court divides the assets. Where there is a period of time between separation and the determination of a property settlement by the Court, the most up to date value will be used. This valuation will also take into account the contributions of either party in respect of any increase in value since separation as a means of dealing with any capital growth since separation.
STEP 3 – CONSIDER CONTRIBUTIONS OF EACH PARTY
Both financial and non-financial contributions to the pool of assets are taken into account. As a general rule, the role of one party as a parent or homemaker will likely be given equal weight to the role of the other party as a “breadwinner”.
The Court will typically look at the assets at the date of cohabitation (when parties commenced living together) and then consider the contribution of each party from that date to the date of separation. Further contributions from the date of separation to the date of the Court’s decision will also be considered before determining a fair and equitable division of the pool of assets based on contributions to date.
Inheritances may also be relevant as contributions by one party to the overall pool of assets.
STEP 4 – DETERMINE FUTURE NEEDS
In addition to past contributions, the Court also considers the future position of each party. The Court will apply an equitable approach as it is the last opportunity to divide financial resources between the parties. The Court will consider a broad range of matters such as:
- Age of each party;
- Health of each party;
- Earning capacity of each party;
- Obligation of one party to care for children or dependants;
- Other financial commitments;
- Likely inheritances; and
- Likely benefits and resources such as family trusts.
STEP 5 – FAIRNESS AND EQUITY
The final step is to determine whether or not the proposed outcome would be fair and equitable. In some circumstances the Court will impose an adjusted outcome to ensure a fairer and more reasonable settlement.
An example may be where the party with the care of the children might not be able to retain the family home. The Court may decide to adjust the settlement in that person’s favour to enable them to retain the family home and care for the children in the home.
Family Law property settlements are a complex and often very emotional event in relationship breakups. Contact us for a confidential discussion of your specific situation, available solutions and options.