The law regulating property settlements is contained in the Family Law Act 1975 (Cth).
All references are to this Act unless otherwise stated.
What is property?
Property can include almost anything to which a value can be attributed. Commonly, it includes land, money, vehicles, superannuation and household goods, but it is worth bearing in mind other items, such as insurance policies, intellectual property, debts due to the spouses, rights to sue, such as potential compensation claims, long service leave entitlements, partnership interests, entitlements as beneficiaries of a trust or a will, etc. One thing that is not regarded as property is the ability to borrow, so one spouse will not be entitled to a larger share of the property on the basis that the other has greater borrowing power, but see Future needs. The Court will also apportion liability for any debts and liabilities of the marriage, such as a mortgage, credit card debts, overdrafts, personal loans and the like.
Property in marriage
Property belonging to a husband or wife before marriage is still that person's property after marriage. This includes furniture, bank accounts, vehicles and other household goods. There is no law that it must be transferred into joint (both) names. Property acquired after marriage also belongs to the person in whose name it was bought or who paid for it. The same applies for debts in sole names. It is only on the breakdown of a marriage that the court looks behind the legal title, and may make orders about ownership, notwithstanding whose name the property is in.
Married couples usually buy homes, units or land in their joint names. When this is done, neither of them can dispose of the property without the consent of the other, even if only one of them paid for it. Both owners must consent if a jointly owned property is to be used as security for a mortgage or loan.
Property prior to marriage
Where parties have cohabited before marriage and their financial affairs have become mixed together, the Court will take into account the financial arrangements during the period of cohabitation when deciding on the division of property. If parties contend that their finances and property remained separate, they may need to produce documentary proof.
When is property valued for property settlement?
Matrimonial property includes anything owned by either spouse at the date of their separation, but does not include property acquired after separation. However, the date of valuation of property is the date of trial, even though this may be some months or even years later. This means that it is in the interests of both spouses to maintain the value of matrimonial property after separation, so as to maximise the value available for distribution between them. The Court may look at the conduct of a party who has wilfully damaged or neglected matrimonial property and may take this into account in the division of property.
The Court's object in making property settlement orders is to bring to an end once and for all the economic relationship between the parties to the marriage by dividing the property in such manner as the Court considers just. A property settlement should therefore cover all the property of the marriage and should take into account the whole economic situation of each spouse.
The Court has broad powers to alter the existing rights to property in any way it sees fit so as to do justice between the parties. It can overturn transactions designed to defeat claims for property settlement or spousal maintenance, such as where a spouse has disposed of assets for less than their true value. It can set aside any orders obtained by fraud or duress. Where a party fails or refuses to carry out orders of the Court in relation to property, the Court can take steps to carry out the orders itself, by signing necessary instrument, and can punish the party concerned.
Wherever possible, people should attempt to reach their own agreement about their property arrangements. This saves the expense, delay and worry of a lengthy property case in court which may take two or three years and cost thousands of dollars. People should seek legal advice before entering into negotiations and finalising any agreement to check that the agreement is fair.
In cases where the parties agree about the division of their property and the property is fairly simple, the parties may complete an application for consent orders. This is available from the Court and online. It may be suitable when both spouses have obtained independent legal advice and where the only property of substance is the matrimonial home, vehicles and household goods.
Where the property is more complex, for example where superannuation entitlements of any substance are to be varied in any way, where a company or business is involved, where a guarantee has been given or where capital gains tax liabilities may arise, it is desirable that each party have independent accounting and legal advice before entering into any consent orders.
Either spouse can apply to the Family Law Courts for property division. The Federal Magistrates Court hears most matters. The Family Court hears fewer, but more complex, matters. There are no restrictions on the amount of the value of the property in dispute.
In limited circumstances, residents in country areas can make an application to the local state Magistrates Court for property up to the value of $20 000 [see Family Law Act 1975 (Cth) s 46].
Before making an application to the court for property settlement in the Family Court, certain pre-action procedures must be complied with, unless an exemption to this requirement applies. These pre-action procedures do not apply to matters held in the Federal Magistrates Court. The pre-action procedures and exemptions are set out in the Family Law Rules, Schedule 1. See also Pre-action Procedures and the Family Court brochure on pre-action procedures in property matters.
Providing that the pre-action procedures are complied with, an action can be started at any time after the separation but must be commenced within twelve months after the divorce becomes absolute [Family Law Act 1975 (Cth) s 44(3)]. In special circumstances, the court may allow a person to apply beyond this time limit; this is called granting leave to apply out of time. The court must be satisfied that:
- in the first instance the applicant appears to have a case for property settlement (this is called having a prima facie case)
- the other person will not be unreasonably disadvantaged by the delay
- the person applying will suffer hardship if leave is not granted and has an adequate explanation for the delay.
No one can be guaranteed that the court will grant this leave. In practice, extensions are not difficult to get, but this should never be relied on.
Where pre-action procedures have been complied with and agreement cannot be reached, or where the matter is exempt from pre-action procedures, the initiating documents are the Initiating Application, and a Financial Statement with details of all property interests. These are filed in Court and served, and the other party responds with a Response to Initiating Application and Financial Statement. Filing fees apply for an Initiating Application a Response to Initiating Application.
Case assessment conference
A case assessment conference will be held as near as practicable to 28 days after the application was filed. The conference is convened by a Registrar, a mediator, or both. The purpose of the conference is to enable the conference convenor to assess the case and make any recommendations about the future conduct of the case, and to attempt to resolve the case or any part of the case by agreement. A case assessment conference will not normally be adjourned.
If the case is not settled at the conference, the parties immediately attend a procedural hearing. At the procedural hearing, the court again investigates the possibility of settlement of any issue. If agreement is reached, the court can make consent orders at the procedural hearing. The court can make procedural orders if necessary and, if the matter is not fully resolved, refer the matter to a conciliation conference.
A conciliation conference is held before a judicial officer, who may be assisted by a mediator. Rule 12.05 sets out the documents that must be exchanged before the conciliation conference. At this conference, parties are encouraged to negotiate to resolve the matter. If this conference is unsuccessful, the matter proceeds to a pre-trial conference. The main purpose of the pre-trial conference is to ensure that the matter is ready for trial. A date for trial will not be set until a pre-trial conference has been held.
If there is a risk that one spouse may deal with property to the detriment of the other, for example by dissipating, transferring, or encumbering it, the Court may grant an injunction under section 114. For example, if a spouse is leaving a job and will be paid long service leave or will be entitled to take superannuation funds in cash, it may be necessary to seek orders preserving those funds. If funds are frozen by injunction or otherwise, it is also possible to apply for release of some portion of those for urgent specific purposes, such as payment of medical or educational expenses for the children. However, the Court would seldom regard the application for property settlement in itself as urgent and normally those which cannot settle will be dealt with in the ordinary course of the trial list.
The Family Law Courts have very wide powers to divide the property in whatever way the think is fair. No two cases are the same and separating couples should get legal advice from a lawyer who specialises in family property law.
There is no rule that property will be divided 50/50, or that it will be divided according to any fixed proportion. Rather, the Court considers the circumstances of each family and tries to do what is fair. The marriage is not regarded as a way of equalising the property of the spouses, as it might in a 'community property' jurisdiction, and on separation the Court's aim is to leave each spouse with a fair share having regard to what they put in, and their needs and responsibilities post-marriage, to the extent that the available property permits this.
The court considers two separate factors when it is making its decision; firstly the contribution each person has made to the property and secondly their future needs.
The Court looks at the history of the relationship and determines how much each person has contributed to buying, maintaining and improving the property [see Family Law Act 1975 (Cth) s 79(4)].
The direct contributions a person makes may include:
- money contributed during the marriage, such as wages or income
- property owned at the time of marriage
- gifts and inheritances
- work done on the property such as building or renovating
- efforts put into building up and running a business.
The efforts of a spouse who worked in the home looking after the children and doing the housekeeping are considered indirect contributions to the property. This is because by staying at home, this person has allowed the other person to go out and earn money. Therefore a home maker can be entitled to a share of the property even though she or he has not paid any money towards it or earned any income during the marriage.
In many marriages the indirect contributions of the home maker are considered equal to the direct contributions of the income earner. This may not be the case where the marriage was short or the direct contributions of one person are large.
The Court will then decide whether more property should be given to the person who has the greater need in the future [Family Law Act 1975 (Cth) s 79(4)(e)]. It will look at matters such as:
- the age and health of both people
- the ability of each person to support herself or himself in the future
- whether either person is supporting another person, such as a child
- whether a person is being supported by someone else, such as a new partner or parents.
This is a highly complex area of law upon which legal advice should be sought. However, as a guide, a court is likely to award a higher amount in recognition of need where:
- one person has access to greater financial resources than the other
- there is no prospect of child support being paid or where payments will be irregular.
Historically, if contributions were roughly equal, then there was a tendency to start from a 50/50 basis and to adjust this to allow more to a spouse who would be out of the workforce due to childcare responsibilities, or whose earning power was much less, resulting in distributions such as 60/40 or 55/45. (Deviations might occur where one party had made a significant separate contribution, such as using compensation monies or an inheritance to reduce the mortgage or purchase an investment property.) However, where child support is to be paid, this approach may no longer be applicable as the child support may itself adjust for the extra expense of caring for children.
People should always get advice from a lawyer who is experienced in family property law.
The Family Law Courts have jurisdiction in any matter arising out of a property settlement under the Family Law Act where one of the parties is a bankrupt. This means that a trustee of a bankrupt can apply to become a party in Family Law proceedings if they can show the Court that the creditors’ interests will be affected.
When this occurs the bankrupt party is not entitled to make any submissions to the Court about property already vested in the trustee, other than with the permission of the Court and this is only granted in exceptional circumstances.
No priority is given to the creditors of the bankrupt party over the non-bankrupt spouse and similarly, no priority is given to the non-bankrupt spouse over the creditors of the bankrupt party. In making any decision the Court must attempt to balance the interests of both parties.
Where property has been vested in the trustee for the bankrupt party, the Court has the power to order the transfer of this property to the non-bankrupt spouse. Once transferred the property is not available to creditors of the bankrupt party.
Types of ownership The main item of property which most people will own will be a house, or home unit or block of land. Ownership of a house and land will normally be in one of the following three forms:
- Sole ownership where the house is owned by either the husband or the wife. During the marriage, the house will be treated as belonging to that person who can mortgage or sell it without the other's permission. On the breakdown of the marriage, the Family Court can make an order which gives the other spouse a share or all of the property even though it is not in their name.
- Joint tenancy is the most common form of ownership for both parties in a marriage or domestic partnership. The home is in the name of both parties. One spouse cannot sell the property without the other's permission and on the death of one of them, the ownership automatically passes to the other.
- Tenants in common each own a share in the property. This can be in equal (50/50) or unequal shares. A spouse cannot sell the property without the other's permission but ownership does not automatically pass to the other spouse on the death of one of them. Each spouse has the right to leave their share in a will to whomever they wish.
Right of occupancy
Regardless of whose name the house is in, a married person is entitled to live there unless a court orders the person to leave. This applies to both the husband and wife.
If they are separated the court can order one person to hand over possession to the other, or that one person can continue living there. In deciding who should have the right to stay in the home the court considers the needs of both people, including who is caring for the children. The court can allow one person to stay in the home even if the home is in the other person's name. However, the court can be reluctant to order a person to leave the home unless the needs of the other person clearly outweigh her or his right to occupy.
If a person is threatening to sell, give away or mortgage the home or any other property during the separation and before the final property order, the other person can seek a court order (called an injunction) to stop this. This only applies to a property in the sole name of the person threatening to dispose of it as a home in both names cannot be disposed of unless both agree or the court orders it sold.
Commonly, disputes revolve around the value of the home, and whether it should be sold or whether one party will buy out the other's interests. If there is enough other property, the court may give one person the home, especially if she or he is looking after the children. However, if there is no other way of giving each person their fair share, the court will order the sale of the home.
While a parent may wish to remain in the home, particularly if they consider that the children are attached to the home and wish to spare them disruption, this issue is often determined by economic considerations. Much will depend on how much the bank is willing to lend and whether the spouse buying the home can afford the mortgage. In some cases the court may postpone the sale and let the parent caring for the children stay in the house until the children grow up, if this is not too far off in the future.
Disputes over the value of the home may be resolved by a valuation, or indeed two valuations if necessary. If they differ, an average may be taken. Spouses sometimes disagree over whether particular work that they may have done on the property has added value, and a valuer can appraise this. One common difficulty is that spouses may spend more on their property than it is actually worth, so that they cannot get back money they have put in. There is often no remedy for this and a spouse may have to accept the loss of this money as the price paid for having the home the way they liked it. If there is little or no equity in the home, and no other substantial assets, it may not be possible for spouses to get out what they put in.
There is no stamp duty payable where property is transferred between separated spouses to comply with a court order (by agreement or as directed by the court). It therefore makes good financial sense to obtain a court order. However, if the only property involved is the matrimonial home and/or a motor vehicle, spouses can obtain an exemption from stamp duty payable on the transfer of these assets by lodging a statutory declaration with Revenue SA.
Note that while spouses are still together there is also no stamp duty payable on transfer of an interest in the matrimonial home (for example, one spouse may own the house they live in, and they may agree that the other spouse also be registered on the title as an owner), or the transfer of registration of a motor vehicle between them [Stamp Duties Act 1923 s71CB]. In order to have the stamp duty waived on the transfer of the shared home or motor vehicle in the above two situations, a special statutory declaration from Revenue SA (Stat Dec 71CA) must be completed.
Superannuation is included as property for the purposes of property settlement proceedings under section 79 of the Family Law Act 1975 (Cth) or when making a financial agreement.
First, the superannuation must be valued. The Family Law (Superannuation) Regulations 2001 set out the methods of valuing most superannuation interests, and the information trustees have to provide. Alternative methods for valuing some superannuation interests have been approved (see the Attorney-General's Department, Family Law Branch for more information). It is advisable to seek assistance from an accountant and the relevant funds or schemes when valuing superannuation interests.
Once it has been valued, it must be decided how the superannuation can be dealt with to provide a just and equitable property settlement or financial agreement. Superannuation can be split, flagged, or off-set against other property.
When an interest is splittable, parties may make a superannuation agreement agreeing to split superannuation. A superannuation agreement is part of a financial agreement and therefore must meet the same requirements as a financial agreement in order to be valid (see Financial Agreements).
A court may order that superannuation be split between the parties in whatever proportions it considers fair in all the circumstances.
Splitting superannuation does not change the rules about when the superannuation becomes available - it will still generally only be available upon reaching retirement age.
Not all superannuation interests are splittable. Under the Family Law (Superannuation) Regulations 2001 reg 11, some interests cannot be split. Under reg 12, some payments made to a member spouse cannot be split, for example payments made because of hardship, compassionate grounds or permanent incapacity. Under reg 13, some payments made to a child after the death of a member spouse cannot be split.
flagging a superannuation interest
A flag operates to stop the trustees of a superannuation fund or scheme from dealing with the superannuation interest. An interest can be flagged pursuant to an agreement between the parties or a court order. The flagged interest is preserved until dealt with under a financial agreement or court order. When a flagged interest becomes payable, the trustees have to notify the parties or the court.
off-setting superannuation against other property
Instead of splitting superannuation, each party may keep the superannuation in their name, but, if one party's superannuation is greater than the other's, one party may receive a greater share of the other property. Similarly, if only one party has superannuation, they may retain their interest and the other party may receive a greater share of the other property. Off-setting can be done by agreement or by court order.
Property orders can also be changed if it is impractical for the orders to be carried out, if one person has defaulted in carrying out the terms of the order, or if circumstances concerning the children's welfare have changed and this is causing hardship to the children or the person looking after them [Family Law Act 1975 (Cth) s 79A]. Transactions which have been entered into to defeat claims under the Act can be set aside.
There are many mistaken beliefs about property and financial entitlements on the breakdown of a relationship. These cause confusion and often make it difficult to reach a fair and just settlement. Some of the most common misconceptions are:
I'll lose my rights if I leave
Many people believe that the person who leaves the family home will lose rights to a share of the property. Behind this is the idea that whoever abandons the marriage or de facto relationship deserves nothing. This is wrong. Each person in the course of the marriage or de facto relationship has earned a share in the property and does not lose it simply because she or he decides it is no longer possible or desirable to remain in the house or the relationship.
I owned it before marriage, so it's mine!
Just because a person owned a property before the marriage or de facto relationship does not mean she or he will automatically have total rights to that property or its value when the relationship ends. The property will be considered a contribution by its owner, but over time it is assumed that both contributed directly and/or indirectly to its maintenance or improvement. In other words, the longer the marriage or de facto relationship, the less important are pre-relationship contributions in the final division of property.
I can keep inheritances and gifts
A spouse is not always entitled to keep gifts and inheritances from her or his family. Generally there is little difference whether the gift was for one spouse or both. In either case it will be seen as a contribution made on behalf of the person whose family made the gift. As with pre-relationship assets, the importance of gifts and inheritances decreases as they become mixed with other property and as the other spouse contributes directly or indirectly to their maintenance or improvement. Where the gift or inheritance was received shortly before the separation, the spouse who received it will have a good argument for receiving its full value in the division of property.
I worked hard for this business and it's mine
People who work hard during a marriage or de facto relationship to build up a business may consider the other spouse is not entitled to a share of it. They claim that the other spouse never worked in the business or only worked as an ordinary employee and should only be paid the equivalent of wages. But where the other spouse has answered the telephones, arranged work for the business, kept the books or entertained business associates, the court will consider this a contribution to the success of the business. Even if the other spouse has never worked in the business but instead cared for the house and children, this will be regarded as an indirect contribution by freeing the other spouse to put more time and effort into the business. Often the other spouse will have worked in another job to provide family income at times when the business was not as profitable and this too will be regarded as a contribution.
This does not mean that the business will have to be shared equally between the spouses. The court usually gives greater weight to the business spouse's direct contributions.
Women always get the best deal
What is not recognised by those who make this statement is that the amount women receive often has to cover both themselves and their children. In the short term this may mean that the actual amount awarded to the women and children will be greater than the man receives but studies here and overseas show that men do better in the long run. A man may have a greater income earning and borrowing capacity. Without children to care for he is able to build quickly on his share of the property. A woman with children may not wish or be able to secure full-time employment. If she has been involved in full-time child care during the marriage, she may not have the necessary skills to find a good job. A divorced or separated woman's capacity to support herself may be a long way below her husband's and the court will often give women marginally more than men to compensate for this and to meet the greater needs of women with children. In the case of younger couples where women do have job skills or careers and where there are no children, women may not receive more than men in the division of property.
A spouse does not automatically get maintenance payments from the other spouse. A separated woman or man who is not caring for children and who is able to work will probably not be awarded maintenance. To obtain maintenance a spouse will generally have to show that he or she cannot support him or herself properly because of the following criteria :
- caring for children, or
- an inability to obtain work due to old age, sickness, or some other reason.
In addition, the person would have to show that his or her spouse was reasonably able to pay the maintenance [Family Law Act 1975 (Cth) s 72]. In deciding whether to make a maintenance order the court is required to take into account the following factors as set in section 75(2):
- the spouses' income and financial resources and their ability to obtain work
- their financial needs and obligations
- their eligibility for social security payments
- their age and health
- whether either spouse is caring for a child under eighteen years
- after separation, a standard of living that is reasonable in all the circumstances
- the extent to which the spouse seeking maintenance has made a contribution to the resources or earning capacity of the other spouse
- the length of the marriage and the extent to which it has affected earning capacity
- the need to protect a parent who wishes to continue the role of parent
- the financial circumstances of cohabitation if the spouse seeking maintenance is living with someone else
- the terms of any property settlement
- whether child support payments have been made or will have to be made in the future
- any other relevant factor.
How much a spouse will be entitled to receive in maintenance after applying these rules will depend upon the individual circumstances of the case. Where a spouse's capacity to earn has been reduced as a result of a long period out of the workforce during the marriage, they may be awarded maintenance to cover a period of job-seeking or retraining. Where they cannot support themselves due to health problems, and the other spouse has the capacity to support them, maintenance may also be ordered. Maintenance is less likely with short marriages, or where each spouse has retained the capacity to earn a living.
A spouse may apply to the Family Court or Court of Summary Jurisdiction for a maintenance order against the other spouse at any time during their marriage or in the separation period leading up to the divorce. An application may also be made during the twelve month period after the divorce. An application may generally not be made more than twelve months after the divorce. Applications after this time can only be granted by leave of the court where the judge is of the opinion that hardship to the spouse and children would occur if leave was not granted [s 44]. This restriction does not apply to an application for maintenance of children (child support), which can be made at any time.
A maintenance order for a spouse ceases upon the death of that spouse or upon her or his marriage, unless the court makes a continuation order. Such an order may be made in (rare) cases, where, for example, a wife was formerly married to a wealthy man and then remarries a man in poor health or poor financial circumstances. Maintenance payments automatically cease on the death of the payer.
Spousal maintenance can be ordered to be paid as periodic payments or a lump sum. In making property orders, it is usual to specify whether any and what amount is paid as spousal maintenance [Family Law Act 1975 (Cth) s 77A]. These orders bring claims for maintenance to an end.